How to Calculate Over Time Salary
Over time calculation is not only an essential part for payroll personnel but also employee has to know how over time is calculated.
I’d explain the formulas to calculate the overtime salary payable and formulas. Overtime (OT) Pay Calculation is based on main three factors:
- Basic Salary of Employee
- Number of Over Time Hours
- OT Formula Type (Normal / Fridays / Other Public Holidays)
Calculations for One Hour Over Time Rate:
One hour Over Time rate is calculated based on a major parameter: Per day work hours. As per current rule, 8 hours & 9 hrs for hospitality, retails sectors are working hours for most of the businesses. There are two main ways to calculate one hour over time rate-by Month or by Year.
- One Hour OT Rate = Salary / 30 / 8 or 9 based on workings hours stipulated.
Description: Monthly Basic Salary, divided by 30 days, divided by 8/9 hours.
- One Hour OT Rate = ((Salary x 12) / 365) / 8
Description: Monthly Basic Salary multiplied by 12 months, divided by 365 days a year, divided by 8 hours.
Method 2 is absolutely perfect however Method 1 is popular and in use widely.
Over time payment compensation is different for Normal days as compare to working on Fridays or other public holidays.
- 1: Calculations for Normal Days Over Time Payment:
OT Payment = (One Hour OT Rate * 1.25) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 1.25] * OT Hours.
- Calculations for Fridays Over Time Payment:
OT Payment = (One Hour OT Rate * 1.5) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 1.5] * OT Hours.
- Calculations for Public Holidays Over Time Payment:
OT Payment = (One Hour OT Rate * 2.5) * Total OT Hours.
Example: [((Salary * 12) / 365) / 8) * 2.5] * OT Hours.