When your small business runs on the efforts of an hourly team, it’s important to keep track of every payroll detail, like calculating overtime on biweekly payroll schedules. Handling overtime properly can be stressful, especially when payroll periods and workweeks don’t line up perfectly.
Understanding overtime calculations can help you manage payroll so that you can stay compliant with labor laws and ensure your team feels valued.
Let’s dive into what overtime on biweekly payroll involves and how to calculate it accurately.
What is overtime on biweekly payroll?
Overtime on biweekly payroll refers to calculating overtime pay for employees who receive their wages every two weeks. This ensures that employees get compensated fairly for any extra hours worked beyond their regular schedule. Missteps here can lead to an unhappy team—or worst case scenario, legal issues.
Typically, overtime pay is 1.5 times the regular hourly rate. This applies to hours worked over 40 in a single workweek. For example, if an employee works 45 hours in one week, they would receive their regular pay for the first 40 hours and overtime pay for the additional 5 hours.
So is overtime weekly or biweekly? Even if you run a biweekly payroll schedule, overtime is calculated on a weekly basis. Understanding how to calculate overtime on a biweekly payroll schedule helps you manage your payroll while staying compliant with labor laws and providing fair compensation for employees.
How to calculate overtime on biweekly payroll schedules.
So how does overtime get calculated? Doing it for your biweekly employees isn’t impossible—it just requires some careful math. Let’s break it down.
1. Determine the workweek.
Establishing your workweek is the first step in calculating overtime on a biweekly payroll. According to the Department of Labor, a workweek is a fixed and regularly recurring period of 168 hours, which equals seven consecutive 24-hour periods.
This period can start on any day and at any hour, but once set, it should remain consistent, which ensures your overtime calculations are accurate and compliant with labor laws.
2. Track hours worked.
Use a reliable method to record all hours, including regular hours, overtime, and any breaks. This can be done through digital time clocks, timesheets, or other time tracking tools. With precise records, you can keep your small business compliant when calculating the correct amount of overtime pay.
TIP: Use Homebase’s time clock to track hours accurately and prevent buddy punching.
3. Identify overtime hours.
Calculate the total hours worked by each employee in the workweek. Any hours worked beyond 40 in a single workweek are considered overtime. For example, if an employee works 45 hours in one week, 5 of those hours are overtime.
It’s important to note that overtime is calculated weekly, not biweekly, even if your payroll is processed every two weeks. If you find your team working overtime regularly, make sure you understand your legal obligations.
4. Calculate overtime pay.
To calculate overtime pay, multiply the number of overtime hours by 1.5 times the employee’s regular hourly rate. For instance, if an employee’s regular hourly rate is $20 and they worked 5 overtime hours, the overtime pay would be calculated as follows:
- Determine the regular hourly rate: $20
- Calculate the overtime rate: $20 x 1.5 = $30
- Multiply the overtime rate by the number of overtime hours: $30 x 5 = $150
In this example, the employee would receive $150 in overtime pay for the 5 hours worked beyond the regular 40-hour workweek. This overtime pay is in addition to their regular pay for the first 40 hours worked.
TIP: Using Homebase payroll, you can automate these calculations, ensuring accuracy and helping you stay compliant.
What are the overtime laws for biweekly payroll runs?
To fully account for your legal obligations, you need to factor in both federal and state overtime laws. Here’s a quick overview.
Federal overtime laws.
The Fair Labor Standards Act (FLSA) sets the baseline for overtime pay in the United States. According to the FLSA, non-exempt employees must receive overtime pay for any hours worked over 40 in a single workweek, regardless of whether employees are paid weekly, biweekly, or on another schedule. The overtime rate is typically 1.5 times the employee’s regular hourly rate.
State overtime laws.
State overtime laws can vary significantly and may offer more generous terms than federal law. Some states require overtime pay for hours worked beyond a certain number each day, not just over 40 in a week.
For example, California mandates overtime pay for hours worked over eight in a single day and double time for hours worked over 12 in a day. Other states may have different thresholds or additional requirements for calculating overtime.
When state laws provide greater benefits to employees than federal laws, employers must follow the state regulations. This means you need to stay informed about the specific overtime laws in each state where your employees work. Ignoring state-specific regulations can lead to compliance issues and potential penalties.
Make sure to regularly review both federal and state regulations to avoid legal complications and provide your employees with the overtime pay they are entitled to. You can also use technology like Homebase’s HR & compliance tools to help you stay up-to-date with labor laws and ensure compliance.
Does overtime reset weekly on biweekly payroll?
You may be wondering, how does overtime work for biweekly pay schedules, and does overtime reset weekly? Well, the Fair Labor Standards Act (FLSA) requires that overtime pay be calculated for each workweek separately. Even if you pay your employees every two weeks, you still need to calculate overtime based on a weekly schedule.
Since biweekly pay periods do not affect the calculation of overtime, you must calculate overtime based on hours worked over 40 in each workweek, not over the entire two-week pay period. So is overtime calculated on a weekly basis? Simply put, yes.
For example, if an employee works 45 hours in the first week and 35 hours in the second week, they are entitled to 5 hours of overtime pay for the first week, even though their total hours for the biweekly period are 80.
Should overtime be calculated daily or weekly?
At this point, you might be wondering if calculating overtime daily would be easier, but the law has clear guidelines on this.
The FLSA mandates that overtime pay must be given for hours worked over 40 in a workweek, regardless of the number of hours worked each day.
For example, if an employee works the following:
- Monday: 10 hours
- Tuesday: 8 hours
- Wednesday: 9 hours
- Thursday: 7 hours
- Friday: 6 hours
They would have worked a total of 40 hours. In this case, no overtime pay is required because the employee did not exceed 40 hours in the workweek.
However, if the same employee works the following:
- Monday: 10 hours
- Tuesday: 10 hours
- Wednesday: 10 hours
- Thursday: 10 hours
- Friday: 5 hours
Then their total hours worked would be 45. Here, the employee is entitled to 5 hours of overtime pay, calculated at 1.5 times their regular hourly rate.
Following this equation is enough to fulfill federal obligations. However, you should check relevant state laws on overtime for whether they have additional guidelines around overtime pay based on hours worked in a day.
6 tips on how to manage overtime on biweekly payroll.
Managing biweekly overtime rules is a balancing act that involves both you and your team. Here are some ways to ensure your team knows what to do with their overtime tracking so that your business can stay compliant.
- Implement an accurate time tracking system. With reliable time tracking, you should have nothing to worry about. You can use a digital time clock, a mobile app, or an online timesheet system. Prioritize tools that are user-friendly and accessible to your whole team, and make sure they’re trained on the system.
- Communicate overtime policies. Make sure all your employees and managers understand the rules regarding overtime, including how overtime is calculated, when it is paid, and any specific policies related to overtime work. Provide this information in writing, such as in an employee handbook, and train managers on how to track, approve, and minimize unnecessary overtime.
- Monitor and control overtime. Review employee timesheets and payroll reports for patterns of excessive overtime and address them promptly. Speak with employees to understand why they are working extra hours and if needed, adjust workloads to ensure a more balanced distribution of tasks. This way, you manage labor costs and ensure your employees are not overworked.
- Use scheduling tools. Digital scheduling tools help you create balanced schedules, forecast labor needs, and avoid excessive overtime. Automated alerts can notify you when employees are approaching overtime, allowing you to adjust schedules accordingly.
- Consider alternative scheduling. Adjusting schedules with strategies like flexible work hours, staggered shifts, or job sharing can distribute work more evenly and reduce the need for overtime. Discuss these options with your employees to find solutions that work for everyone, so that your business is an efficient and balanced environment.
- Stay updated on overtime laws. Laws can change, so staying updated at both the federal and state levels helps you stay compliant. You should regularly review legal resources to understand any new regulations that may affect your payroll practices and consult legal expertise if needed.
What are the penalties for not paying overtime on biweekly payroll?
Failing to pay required overtime can have serious repercussions. Next time calculating overtime looks daunting, keep in mind these potential penalties so that you can stay compliant and protect your business.
- Civil fines: Fines can vary based on the severity of the violation and the number of employees affected. The Department of Labor (DOL) enforces these fines to ensure compliance with the Fair Labor Standards Act (FLSA) to ensure fair labor practices.
- Back pay: As a common consequence of unpaid overtime, you may be required to provide back pay to affected employees. The DOL can order employers to compensate employees for up to two years of unpaid overtime. If the violation is found to be willful, this period can extend to three years.
- Legal action: Employees can take legal action against employers who fail to pay overtime. This can result in lawsuits that may lead to court-ordered payments and additional legal fees. Legal action can be time-consuming and costly, not to mention a major blow to the reputation of any small business.
- Criminal prosecution: In severe cases, employers may face criminal prosecution for failing to pay overtime. This typically occurs when there is evidence of intentional wrongdoing or repeated violations. Criminal prosecution can result in fines, imprisonment, or both.
- Damages awarded to employees after litigation: Courts may award damages to employees in addition to back pay. These damages can include liquidated damages, which are equal to the amount of unpaid overtime. In some cases, courts may also award punitive damages to punish employers for egregious violations
Power through payroll with Homebase.
Now that you know the practical and legal ins and outs of how to calculate overtime on biweekly payroll schedules, you can run your next pay period with confidence. As fair compensation of your employees is an important part to any business owner’s responsibilities, you can find tools to help you with the process.
Remember, payroll doesn’t have to be painful. Get started today with Homebase and our all-in-one team management app designed specifically for hourly teams and small businesses to see how we can help streamline your time tracking, scheduling, payroll, and HR management.
Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.
