A guide to overtime pay computation around the world
Sometimes, not all the work you have can be accomplished in the week. You can choose to move some tasks over to the following week, or if you’re determined to get everything done now, you can choose to work overtime.
Overtime pay computation is a complex process, and it differs for many countries. Read on to learn about the different overtime pay computations around the world.
Overtime pay computation around the world
What is overtime pay?
Overtime pay refers to employees’ compensation for working beyond the normal working day. Your eligibility and how much you receive in actual overtime pay depends on the:
- Weekly earnings
- Actual working hours
- Company’s overtime rate
How overtime pay works depends on a variety of factors, and every country (sometimes even multiple provinces or territories) has its own method of overtime pay computation.
The term “overtime pay” can also refer to the employer’s remuneration (or the total amount paid for services) for the employee’s extra working hours.
A normal day’s working hours are established to create a balance between workers’ health and productivity. Overtime pay necessarily counters any imbalance that extra work hours incur.
Calculating overtime pay
While overtime pay computation varies per place, there are still a few general procedures to follow.
To calculate the hourly overtime rate in most places, multiply the normal rate of pay by the company’s overtime rate. To find the total overtime pay, multiply the number of overtime hours worked by the calculated overtime rate.
Employers must consider these steps before administering overtime pay:
- Determine if the employee is eligible for overtime pay
- Track the employee’s weekly working hours
- Confirm the overtime pay rate of the company
- Calculate overtime pay
Overtime pay computation around the world
Here is a look at overtime pay computation of selected countries around the world.
In the Philippines, labor laws require employers to pay their employees overtime pay for any work performed beyond eight hours of the day. They will add an additional 25% of their hourly rate on regular days and 30% during rest days and holidays.
“Exempt” employees do not receive overtime pay. This definition covers the following:
- Government employees
- Managerial employees
- Officers or members of a managerial staff
- Stay-in helpers and persons in the personal service of another
- Workers who are paid by results
- Field personnel
For overtime pay computation in the Philippines:
- Determine hourly rate.
- Multiply the hourly rate by 125% (the total additional overtime rate) to get the overtime rate per hour.
- Multiply the overtime rate per hour by the number of overtime hours worked.
In the USA, overtime pay computation for nonexempt employees is handled by the Fair Labor Standards Act (FLSA), which is subject to some special rules for federal employees.
All overtime must be compensated, whether it is approved and ordered, or “suffered or permitted.”
Under the FLSA, overtime pay computation is done by multiplying the employee’s “straight time rate of pay” by all overtime hours worked. Next is to add half of the employee’s regular hourly rate of pay multiplied by all overtime hours worked.
(Straight time rate of pay * overtime hours worked) + ½ (regular hourly rate of pay * overtime hours worked)
Straight time rate of pay refers to the hourly rate of basic pay.
Aside from overtime pay, the UK also uses a concept called “time and a half.” This is when employees are paid 1.5 times their normal rate for coming into work when they are otherwise not expected to.
This concept also covers holidays and is used to incentivize employees.
While an employer can offer overtime to cope with an increase in demand for their products or services, in the UK, there is no legal responsibility to pay for extra working hours.
Should they decide to do so, they follow these steps:
- Determine an employee’s standard weekly or monthly pay
- Multiply the daily pay by the overtime rate and number of overtime hours worked
- Combine the two figures to result in the full amount payable for a weekly or monthly period
Labor laws in India describe two methods for overtime pay computation, but this may also vary depending on location or designation.
Generally, overtime workers must be paid at a rate that is double their regular rate. The employer may accept actual work up to nine hours every 12-hour shift on normal days.
For overtime pay computation for day workers:
2 (Basic pay + DA + RA)/total no. of days in a month) maximum working hours in a day * overtime hours
- Overtime is calculated for each hour of extra work.
- DA refers to dearness allowance, which is paid to government employees to lower the impact of inflation.
- RA or HRA refers to house rest allowance, which is paid to meet the expenses of renting a house.
In Australia, if an employee is not covered by a modern award or enterprise agreement, then whether they can earn overtime pay depends on their employment contract.
Overtime is required to be paid at:
- 150% of an employee’s ordinary time hourly rate for the first two to three hours of overtime worked
- 200% of an employee’s ordinary time hourly rate after the first two to three hours of overtime worked
Some agreements also allow for the concept of time off in lieu (TOIL), which is paid time off instead of overtime pay.
For overtime pay computation:
- Determine hours worked in a week
- Calculate hourly rate
- Determine the company’s overtime pay rate
- Multiply the hourly rate by the overtime pay rate
In Spain, any hours worked beyond the 40-hour work week qualify for overtime pay. There is also a maximum of 80 hours of overtime that can be worked per year, limiting how long employees can work.
The standard overtime pay rate adds 75% of the regular hourly pay.
To calculate the overtime hourly rate, divide the monthly gross salary by the regular monthly working hours.
This initial result is the hourly rate of pay, which is then multiplied by 75% to get the overtime rate.
In Brazil, overtime pay compensation is triggered when an employee works beyond the standard working hours agreed upon by their contract. Overtime pay equals 1.5 times the employee’s salary.
Working on Sundays or public holidays qualifies for a double salary pay. Brazil also limits overtime, setting it at a maximum of two hours per day and paying 150% of the standard salary rate.
This may be extended to four hours for any work that cannot be postponed, in which case, the employer must inform the Ministry of Labor to avoid potential legal issues.
Overtime pay computation is as follows:
- Daily overtime pay: 5 am- 10 pm, to be paid a rate of 50%
- Nightly overtime pay: 10 pm- 5 am, to be paid at least 50%, plus 20% of night bonuses
In Vietnam, regular working hours cannot exceed eight hours a day, 48 hours a week. This is even less for those working in heavy-duty or hazardous conditions as they’re limited to six hours a day.
Employees that work overtime are paid based on their current hourly wages.
- At least 150% for extra hours worked on regular workdays
- At least 200% for extra hours worked on the weekends
- At least 300% for extra hours worked on holidays and paid leave days
- An additional 30% for night shifts
In France, overtime is any work done beyond the established weekly limit of 35 hours.
When there’s an agreement in place, overtime pay is no less than 110% of the regular wages. If no agreement has been set, overtime pay should be 125% of the regular pay for the first eight hours and 150% for any succeeding hours.
Employees are allowed an annual quota of 220 hours of overtime. France also sets a mandatory compensatory rest for any hours performed over this annual quota.
In Canada, overtime pay is 1.5 times the employee’s regular rate of pay (time and a half).
Overtime pay computation is done on a strictly weekly basis. Daily overtime rates are not calculated unless an employment contract or a collective agreement states otherwise.
Overtime pay computation can also be done over a larger period with the exception of an averaging agreement.
Within Canada, different provinces and territories have their own methods and standards of overtime pay computation.