Overtime rules in the United States are generally simple. According to the Fair Labor Standards Act, non-exempt employees who work over 40 hours a week earn 1.5x their normal rate of pay for overtime hours. If employees earn multiple pay rates during their shifts (perhaps due to different positions they may have within a company), business owners must calculate their regular rate of pay for overtime and pay their workers accordingly. If you’re in a state like California, overtime becomes a little more complicated. Employees in California earn daily overtime and may even earn double time depending on how many hours they work. Not only that, but other overtime rules apply when employees are on an Alternative Workweek Schedule.
Calculating overtime correctly is vital when trying to lower your payroll costs. If not done properly, you may end up overpaying or underpaying employees, which can lead to legal penalties and other costs down the line. If you have employees who operate on an alternative workweek schedule and you’re in California, you’ll want to make sure you know how to calculate the exact overtime rates for your employees.
What is an Alternative Workweek Schedule?
Alternative workweek schedules (AWS) are different than the normal 8-hour shifts that we’re used to seeing in the workforce. Instead of working five days a week, those on an AWS work four 10-hour shifts a week (normally, but it can differ).
Why Do People Need a Different Schedule?
Employers may give their employees an alternate schedule for a few reasons. Perhaps they realized that they could save expenses if employees were gone one day a week. Alternatively, they may have noticed that employees are more productive when they have a long weekend. There’s also the benefit of reduced commuting time and costs. Additionally, if your company is in high demand in multiple time zones, like Apple or Amazon, you may need to change your workweek in order to reach and support customers during all hours.
California Alternative Workweek Schedule
California employees typically receive overtime if they work more than 8 hours in a single workday. However, when working an AWS, employees no longer earn overtime after 8 hours. Instead, employees who work over 10 hours in a day are entitled to overtime at 1.5x their regular pay rate. Those who work over 12 hours in a single shift earn 2.0x their regular rate of pay for those hours that exceed twelve.
Note* There are numerous exceptions and requirements for those who implement alternative workweek schedules. Please speak with legal counsel before implementing alternative workweek agreements in your establishment.
Employees in California working an AWS earn overtime after 10 hours in their shifts. Any overtime hours between 10 and 12 are considered 1.5x their regular rate of pay. Any hours in excess of 12 are compensated at 2.0x their regular rate of pay. This is known as “double time”.
Let’s say that an employee with an AWS worked from 7:00 am to 9:00 pm (14 hours total) at a regular rate of $15.00/hr. To calculate their overtime, follow these steps:
1. Finding their rates
First, you’ll want to figure out their overtime rate and double time rate. This employee earns $15.00/hr. To calculate their overtime rate, simply multiply their regular rate of pay by 1.5. $15.00 x 1.5 = $22.50. This employee’s overtime rate is $22.50/hr. To find their double time rate, multiply their hourly rate by 2.0. $15.00 x 2.0 = $30.00. Their overtime rate is $30.00/hr.
Now that you know those numbers, you can figure out their overtime based on their timesheet.
2. Timesheet calculations
- View their timesheet and examine how many hours they worked. In this case, the employee worked a total of 14 hours.
- Take note of any hours worked from 10-12 hours and write it down. This is the number of overtime hours they may earn. This employee worked 14 hours in total, meaning that they earned 2 hours of overtime.
- Write down the number of hours the employee worked in excess of 12 hours (double time). Since they worked 14 hours, they have 2 hours of double time.
- Multiply the number of overtime hours the employee earned by their overtime rate. This employee’s overtime rate is $22.50. $22.50 x 2 hours= $45.00 of overtime.
- Next, multiply their double time hours by their double time rate. $30.00 x 2= $60.
In total, this employee earned $45.00 of overtime and $60.00 of double time.
3. Total earnings
To take this further, you can figure out how much their entire gross paycheck for the day will be:
- This employee worked 10 hours before earning overtime and earns $15.00/hr. Multiply their hourly rate by the number of hours they worked. $15.00 x 10 hours = $150.00. This employee earned $150.00 of regular pay (without taxes included).
- Next, add the amount of overtime and double time hours to the previous number. $45.00 + $60.00 + $150.00= $255.00.
This employee worked 10 regular hours, 2 hours of overtime, and 2 hours of double time, totaling 14 hours. This employee’s total gross earnings were $255.00 for this shift.
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