As long as the workweek is 168 hours long, each employer determines when it begins and ends. So, how do you calculate overtime for a semi-monthly payroll?
For example, in one organization, the workweek may run from Monday morning to Sunday night, whereas at another, the workweek may run from Sunday morning to Saturday night.
Because federal law prohibits, averaging hours worked each week to calculate overtime, if your company pays semi-monthly, you must calculate the overtime due for each employee each week of the pay period.
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How to Process Hourly Employees’ Semi-monthly Payroll
Hourly employees’ schedules frequently change from pay period to pay period.
Employers frequently delay paydays for hourly employees to allow for timesheet processing.
Hourly employees could be paid semi-monthly on the 7th and 22nd of the month for hours worked from the 16th to the end of the month and the 1st to the 15th of the month, respectively.
Large organizations may have internal deadlines for timesheet submission between the end of the pay month and the payday.
Because federal law prohibits averaging hours worked each week to calculate overtime, if your company pays semi-monthly, you must calculate the overtime due for each employee each week of the pay period.
Keep in mind that the following advice will be more effective if you use efficient payroll management software. Not only do these tools automate most of your payroll tasks, but they also handle the math for you. It’s also possible to create custom pay periods and tack on extra wages from bonuses or overtime.
For example, the internal timesheet deadline might be September 17th, and the payday might be September 22nd for September 1st to 15th.
How to Take Into Account Overtime Factors
Hourly employees must be paid a premium for overtime hours under federal law.
The Fair Labor Standards Act defines “workweek” over time, not matching the semi-monthly pay period.
As a result, bi-weekly pay periods are frequently favored by hourly employees.
To properly reward hourly employees paid semi-monthly, businesses must maintain a good track of overtime hours.
How to Calculate a Semi-Monthly Paid Employee’s Daily Rate
Employees are not required to begin work on the first of the month. Additionally, your company may bill an employee’s time to an internal account or an external client for specific projects.
You should know your employee’s daily rate for both of these reasons.
Divide a full pay period’s gross semi-monthly compensation by the number of calendar days in that pay period.
In a 15-day pay period, a semi-monthly gross pay of $2,000 amounts to a daily rate of $133.33. Throughout a pay period.
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How to Calculate Overtime for a Semi-monthly Payroll
1. Separate into Workweeks
Divide the paycheck period into workweeks according to your company’s guidelines.
For example, if your semi-monthly pay period starts on Thursday and finishes on Thursday, and your firm defines a workweek as Monday morning to Sunday night, the pay period includes portions of three workweeks.
2. Total the Hours Worked for the Week
For the first workweek of the pay period, add the hours worked for the full workweek.
Even if the pay period began on a Thursday, you would calculate the overtime hours by adding the hours worked from the previous Monday through the first Sunday.
Supposing an employee worked 30 hours from Monday to Wednesday before the pay period began and 20 hours from Thursday to Sunday, the employee would have 10 hours of overtime credited to the current pay period out of the 20 hours.
3. The Addition of the Second Workweek
To calculate the number of overtime hours worked, add the number of hours worked in the second workweek of the pay period and deduct 40 from the total.
The second week will always be a full week with semi-monthly pay periods.
For example, if an employee worked 45 hours, 40 hours would be regular pay, and 5 hours would be overtime.
4. The Total Number of Hours Worked
Calculate how many hours you worked in the last week. Pay no overtime for the current pay period if the employee has not yet worked more than 40 hours.
However, include these hours when calculating overtime payments for the next pay period.
Since the work week finishes on Thursday, you would not pay overtime if the employee had worked 40 hours that week.
But if the person worked any more hours from Friday through Sunday, those hours would be included as extras on the next paycheck.
5. Addition Overtime
Add the overtime from each semi-monthly pay period’s weeks, if any.
To reach 15 total overtime hours, add the 10 hours from the first week to the 5 hours from the second week in this example.
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Conclusion
Conclusively, following the above steps will help you calculate overtime for a semi-monthly payroll with ease.
We hope you enjoyed reading this piece as much as we enjoyed writing it.
