How Overtime Is Shown on a Pay Stub (And Why It Matters)

Accurately showing overtime on a pay stub is essential in ensuring you get properly compensated for the extra work you put in. Overtime is typically included as a standalone item on a pay stub since that makes it easier to track for tax, legal, and loan purposes.

In this article, we’ll learn what overtime is, how it works, how the pay is calculated, and how it should look on a pay stub. We’ll also show you how to effortlessly generate precise and professional pay stubs (overtime included) using our intuitive tools, which will significantly simplify your recordkeeping. Let’s get started!

Key Takeaways

• Overtime pay is a form of additional compensation for employees who work more than the standard 40 hours in a week.
• Overtime on a pay stub is typically presented as a separate item under the earnings category.
• The multiplier for overtime pay is usually 1.5 times the regular rate.
• Under certain circumstances, professional, administrative, and executive employees can be exempt from overtime pay.
• If an employer doesn’t pay overtime, they can face fines, lawsuits, and criminal charges, and their businesses will suffer reputational damage.

What Is Overtime Pay and How Does it Work?

Overtime pay is the additional compensation on top of the regular salary given to employees who work more than the standard number of hours in a week. It is mandated by the Wage and Hour Division of the Department of Labor through the Fair Labor Standards Act (FLSA). The act also establishes minimum wage, recordkeeping, tip regulations, and child labor.

Under the FLSA, a workweek consists of 40 work hours over the span of seven consecutive days. Every additional hour an employee works during that time is considered overtime. The beginning of a workweek is usually decided by an employer and included in an employee’s contract.

Overtime is paid more than regular hours, with rates being at least 1.5 times more than regular. That’s why overtime pay is often referred to as “time and a half pay.”

It’s important to know that the rules the FLSA sets represent the minimum of the employer’s obligations. Depending on the state, the rules about overtime can be stricter. For instance, in California, employees receive overtime payment for every hour worked beyond eight in a single day, even if their hours don’t exceed 40 during that week.

How Overtime Looks on a Pay Stub

Overtime on a pay stub is typically listed as a standalone item and included in the ‘earnings' section. It should display the overtime rate and your hours, as well as total and YTD total earnings.

During a simple pay stub breakdown, you should be able to clearly spot regular and overtime hours and other types of earnings that go into your gross pay, date, deductions, and your net salary.

This orderly arrangement makes it easy to read a pay stub and understand all the information it provides so that you can use it as proof of income or when filing taxes.

How Is Overtime Calculated on a Pay Stub?

A straightforward way of calculating overtime on a pay stub is by separating regular and overtime hours. This simplifies the process, as employers can apply standard rates to regular hours and increased rates to overtime work.

For instance, if an employee worked 45 hours in a week, the first 40 hours will be paid regularly, while the last five will be multiplied by a rate of at least 1.5 times the regular one.

Some employers will use a blended overtime rate to shorten pay stubs and simplify payroll calculations. They’ll add regular and overtime hours together before applying a uniform rate bigger than the regular one, since it takes overtime into account.

Another way to calculate overtime on a pay stub is by applying shift differentials. Sometimes, employees will work shifts that are paid more than regular ones by default. For instance, holiday shifts typically have higher rates. When calculating salaries, employers must take into account both regular and increased rates before multiplying them for overtime.

Lastly, there’s a weighted average calculation for employees who work different jobs with varying pay rates. In this case, employers must consider all their rates and find a weighted average to which they’ll apply the overtime multiplier, ensuring fair pay.

Overtime Pay Calculation Example

Here’s an example of an overtime pay stub calculation for a weekly salary made by separating regular and overtime hours:

• Salary: $1,000 per hour
• Hours worked this week: 48 hours
• Regular hours: 40 hours
• Overtime hours: 48 - 40 = 8 hours
• Regular rate: $1,000 / 40 hours = $25 per hour
• Overtime rate: $25 x 1.5 = $37.50 per hour
• Overtime earnings: 8 hours x $37.50 = $300
• Gross pay: $1000 + $300 = $1,300

Overtime Pay for Exempt vs. Non-Exempt Employees

In addition to workers who qualify for overtime pay (non-exempt employees), there are those who don’t qualify regardless of how many work hours they have (exempt employees).

The U.S. Department of Labor published a final rule that defined executive, administrative, and professional employees as exempt from minimum wage and overtime pay requirements.

However, there are certain criteria these employees must fulfill before becoming exempt from overtime protections. For starters, they must make at least twice the minimum wage. If they make less than that, they don’t qualify for the exemption. Otherwise, they need to fulfill another condition, depending on the type of employee they are.

Professional employees need to spend at least half of their work hours in a “learned or artistic profession.” This encompasses fields like architecture, teaching, and dentistry, where the work needs to be original and based on the professional’s own talent.

Administrative employees become exempt if they make independent decisions without direct supervision and spend more than half of their work hours on tasks of significant importance. On top of that, they either need to directly assist the company owner or upper management or perform work that requires specialized training.

Executive employees need to fulfill all of the following conditions to become exempt from overtime pay requirements:

• Spend more than half their work hours doing managerial work
• Make independent decisions regularly
• Supervise at least two full-time employees directly
• Have hiring and firing authority within a company

3 Common Overtime Mistakes and How to Fix Them

Here are the three most common mistakes employers make when doing overtime pay calculations:

#1. Including Overtime in Regular Hours

Including overtime in regular hours will result in applying a standard rate to it and giving employees a lower paycheck than they earned.

This problem can be easily fixed by separating overtime hours in a pay stub and calculating them independently.

#2. Incorrect Calculation of Overtime Rate

Even if the hours are separated, an employer can apply the wrong rate during the overtime calculation. For instance, they can apply a rate lower than 1.5 or not take holiday or vacation pay into account to further increase the overtime rate.

To fix this, employers should always calculate the actual regular rate and verify if it needs to be adjusted in specific cases. Only then should they apply the overtime rate and determine the premium.

#3. Missing Overtime Label

Not adding the overtime label makes it difficult to read a pay stub and verify whether the information on it is accurate. That’s why it’s vital to follow good recordkeeping standards and practices and correctly label every item on a pay stub.

Legal Consequences for Employers Not Calculating and Paying Overtime

Employers who don’t calculate overtime correctly (or pay it at all) can face severe financial and legal consequences. Here are some of the penalties for violating the FLSA’s overtime rules:

• Monetary fines. Employers can be required to pay back their employees all missed overtime wages, along with potentially hefty fines and penalties imposed by the Department of Labor.

• Lawsuits. Employees who don’t receive their overtime pay can sue their employers. If they win a case, they’ll receive their missed wages with additional damages. Moreover, employers will be required to pay legal fees.

• Criminal charges. In cases of severe willful violations of the FLSA, employers can face criminal charges, which can even lead to prison time.

On top of all these legal consequences, employers found guilty of not calculating and paying overtime will likely damage their reputation. This can negatively impact their business, causing them to lose clients or customers. Moreover, they’ll likely find it difficult to attract or retain talent.

How Employees Can Deal With Overtime Disputes

There are several things employees can do to deal with overtime disputes in a professional manner.

For starters, if you think your pay stub overtime hours are off, you should first carefully compare them to your timesheets or calendar entries to ensure that you’re in the right.

Then, you should gather the proof and head to the HR department, your supervisor, or directly to the employer. Make sure to present your case calmly and professionally, as overtime disputes can sometimes arise due to simple administrative and payroll errors.

If they stay adamant about their decision, you should put in a formal request in writing (e.g., via a memo or email) asking for missed overtime pay. This creates a paper trail that can help you down the road.

Lastly, you should file a complaint with the U.S. Department of Labor’s Wage and Hour Division stating your case. To maximize your chances of success, you should contact a lawyer who specializes in employment law.

How Paystub.org Can Help

Paystub.org can help with employee overtime tracking with a simple and intuitive pay stub generator. Our platform allows employers to create professional, accurate, and easy-to-read pay stubs in minutes.

Employees can use our online pay stub generator to keep track of their income and enhance their financial management. Our software solution features ready-made templates where all you need to do is input your information, and the tool will do the rest.

The generator has built-in sections for overtime, vacation, and holiday pay, start and end pay periods, deductions, and more. It will automatically calculate and display gross pay with overtime and other earnings, making overtime wage reporting a breeze.

How to Create a Pay Stub With Overtime

You can create a pay stub with overtime in the following four simple steps:

1. Select the pay stub generator on the main page of our website (we also have an invoice generator, Form W-2 generator, and Form 1099 generator).
2. Choose a template that suits your needs and fill in the payment, company, and employee information.
3. Input the overtime rate and hours in the earnings statement. Our tool will automatically calculate the total and YTD total and add it to your gross pay.
4. Head to checkout to download your document after filling out the rest of the information.

Final Thoughts

Overtime pay isn’t just pocket money in addition to your regular salary; it’s a legally mandated form of compensation to ensure a fair reward for hard work. It’s a financial tool used to not only reward employees but also deter employers from overworking their staff.

Knowing how to add overtime on a pay stub and read the document ensures you’re paid adequately and helps you keep track of your finances. To simplify the process and maintain accuracy, you can use our pay stub generator. That way, you’ll always be on top of your records while remaining tax-compliant.

Overtime on a Pay Stub FAQ

#1. Is overtime calculated by day or week?

As a general rule outlined under the FLSA, overtime is calculated by the workweek. A regular workweek consists of 40 work hours over seven consecutive days (or 168 hours total). It’s important to note that some states do have stricter laws that mandate overtime be calculated by day.

#2. How does overtime work in a 2-week pay period?

Overtime works in a 2-week period by being calculated one week at a time. Employers aren’t allowed to take the average of two weeks and potentially skip on paying overtime. For instance, if you worked 45 hours one week and 35 the other, you’re entitled to five hours of overtime.

#3. Is overtime pay included in gross income on a pay stub?

Yes, overtime pay is included in gross income on a pay stub. It’s a part of your total earnings before any deductions. Your gross pay encompasses earnings from both regular and overtime hours, as well as bonuses, tips, holiday and vacation pay, and more.

#4. Can I create a pay stub that includes overtime using Paystub.org?

Yes, you can create a pay stub that includes overtime using Paystub.org. The process is simple, as our software tool already has the overtime item built into the template. Input your rate and hours, and they will automatically appear in your pay stub and reflect in your gross pay.

#5. What should I do if my overtime pay is missing or incorrect on my pay stub?

If your overtime pay is missing or inaccurate on your pay stub, you should check your time records. If your records are accurate, take them to your employer to rectify the issue. If they don’t fix the issue, consult a lawyer or file a complaint with the Department of Labor.