What is a overtime? Definition and examples
Overtime refers to the length of time an employee works on top of their normal working week. We also use the term when talking about payment for those extra hours.
Most workers have a fixed number of hours they work each week in their employment contract. Sometimes, they may have to or volunteer to work more than their contract requires. We refer to that extra work as overtime.
Sage.com has the following definition of the term:
“Overtime refers to any hours worked by an employee that exceed their normally scheduled working hours. While a generalized overtime definition refers simply to those hours worked outside of the standard working schedule, overtime commonly refers concurrently to the employee’s remunerations of such work.”
For some employees, overtime is the only way they can boost their take home pay, unlike sales representative who earn a commission or their bosses who get an annual bonus.
Overtime and the law
In some countries, special hourly rates of pay are compulsory when workers do extra hours, while in others they are not.
In the United States, employers that require or allow their workers to work overtime are usually required to pay a premium rate of at least time and a half.
Regarding working extra hours, the US Department of Labor says:
“An employer who requires or permits an employee to work overtime is generally required to pay the employee premium pay for such overtime work. Employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked in excess of 40 in a workweek of at least one and one-half times their regular rates of pay.”
In the United Kingdom, however, it is up to the employer. Paying a premium rate is not compulsory.
The British Government says the following about payment for working extra hours across the country:
“Employers do not have to pay workers for overtime. However, your average pay for the total hours you work must not fall below the National Minimum Wage.”
“Your employment contract will usually include details of any overtime pay rates and how they’re worked out.”
Types of overtime pay
Time and a half
If you are paid $10 per hour for a 40 hour week and time and a half for any additional hours, you will get $10 + $5 = $15 for each additional hour. In this context, time means your rate of pay per hour during your normal working week, i.e., $10.
If your company has a special overtime rate of double time for Sunday, you will be paid $10 x 2 = $20 for each hour that you work on Sunday. In other words, your Sunday premium rate is double time or $20 per hour.
Maybe your company pays triple time on, for example, Christmas Day, Easter Sunday, or New Year’s Day. If you work on those days, you overtime pay for each hour would be $10 x 3 = $30.
If you are not sure what your employer’s overtime rates are, either check in your employment contract, ask your boss, or talk to somebody in the HR department. HR stands for Human Resources.
Managers and directors
In some countries or companies, managers and directors do not get overtime pay. They are salaried rather than hourly paid employees. They are expected to work the extra hours if they are necessary. However, in most companies, they get a bonus which is typically linked to their performance or annual profits.
Whether managers receive money for doing extra hours may depend on whether they are exempt or non-exempt employees. An exempt employee is paid a salary, while a non-exempt one receives an hourly wage.
SmallBusiness.Chron.com says the following about managers and overtime in the United States:
“Exemption status is typically based on the employee’s job duties. Exempt managers receive a specific salary regardless of the number of hours worked during the week. A nonexempt manager receives an hourly wage and must be paid for each hour worked during the week, including overtime.”