Pay Period Versus Work Week and How It Relates to Overtime
Occasionally, we hear from customers who want to know why an employee has overtime on his Pay Period Report but does not appear to have overtime on his timecard. Under normal circumstances the two would match but given the right mix of conditions they sometimes don’t. Today I am going to explain why that is and what you can do to avoid it.
First, let’s get our definitions straight. The Department of Labor (DOL) defines a workweek to be any period of 7 days, beginning and ending on the same days week after week. This just means that you can’t have a workweek start on a Sunday one week and start on a Wednesday the next week. When you flip flop the workweeks like that, overtime can get lost and that sets a business up for overtime lawsuits.
So, what does this have to do with overtime on timecards? The default workweek for overtime calculations in the Timsheets/TimeClockOnline system is Sunday at 12am to Saturday at 11:59pm. But let’s say you are used to running payroll from Tuesday to Monday. Then the overtime calculations that you will be seeing on the timecard, i.e. all the hours from Tuesday to Monday, are going to look different than what the system is calculating in a Pay Period Report – i.e. from Sunday to Saturday.
If that’s still confusing, let’s take a look at an example:
All is well by the looks of this timecard. This employee seemed to have a pretty short week. Or did she? You would probably be pretty confused if you went to close out your payroll and you saw this:
Wait, what?!! Overtime? There are only 17 hours on this report. How could Heather possibly have overtime? Take a close look, though, and you will see that there are previously paid hours for this “workweek” that must be considered when calculating overtime.
The previously paid hours were 26 and the current hours are 17. This adds up to 43. So for this workweek we are looking at 3 hours of overtime even though the hours were run in two different pay periods.
While it is a confusing problem, there is an easy fix for it. Simply adjust your workweek and pay your employees based on the standard Sunday through Saturday workweek, or adjust the workweek setting in the employee’s settings.
Once you’ve done that, you will be running your pay period reports with no overtime hours since the workweek will now match the pay period report.
Be aware that running bi-monthly pay period reports can also produce the same confusing results on occasion. The reason for this is the same as the above. Bi-monthly pay periods usually run from the 1st through the 15th and the 16th through the last day of the month. This sets you up for the same problem since those dates will always be on different days of the week.
For standard hourly employees, i.e. employees who are not exempt from overtime, weekly or bi-weekly payroll schedules are best because it is easier to make sense of the numbers.