A new setup option allows the employee’s normal rate for the job being performed during the overtime period to be used for the base portion of the overtime rate and then adding one-half of the regular rate for the period. Previous to this version (unless the employee’s standard setup rate was being used) the rate for all overtime was calculated by multiplying 1.5 times the employee’s regular rate for the period, where regular rate is the average rate for the period taking into account all regular (IsRegOT) wages.
· If your employees earn a single rate for all jobs and do not earn commissions that factor into the regular rate, changing this setup option would have no effect and you do not need to read any further, unless you intend to compensate employees in either of these manners in the future.
· If your employees earn different rates for different types of work, using the new overtime option may or may not be preferable to you and your employees, but there would be little difference in the total amount an employee earns for overtime over a long period of time.
· If your employees earn commissions that factor into the regular rate (IsRegOT) and you change to the new setup option, your employees will see a decrease in the rates they earn for overtime, since the normal base part of their overtime rate will no longer be inflated by the commissions. Only the premium addition (the extra one-half) would then be affected by IsRegOT commissions.
Payroll Setup still has the option to pay overtime at the employee’s standard rate from employee setup, but this option has been expanded a little. The standard setup rate can be applied to the premium addition portion of the overtime rate and the base portion of the rate, if desired. Note that in either case, if the setup rate is less than the calculated regular rate for a particular payroll period, the higher regular rate will still be used.
To check your settings for premium calculations, open Payroll Setup and select the “4 NTC’s & Premiums” & tab.