Overtime tracking software that catches it before payday

The buyer’s guide to overtime tracking software

Most small employers add up time cards after the week ends and multiply anything over 40 by one and a half. That works until a bonus, a shift differential or a state daily rule changes the math. This guide covers the US rules overtime tracking software has to follow, where the rate most often goes wrong and what to look for in a tool.

What overtime tracking software does

Overtime tracking software does four jobs. It counts hours for each workweek from time clock punches, splits the week into regular and overtime hours, warns managers when someone is approaching the overtime line, and hands approved overtime to payroll at the correct rate.

The first and last jobs are where most errors come from: hours remembered on Friday, or overtime retyped into payroll at the base rate. In Workzenly the punch, the timesheet and the pay run are one record, so the overtime a manager approves is the overtime on the pay stub.

Federal overtime basics

The Fair Labor Standards Act (FLSA) sets the federal rule. According to the U.S. Department of Labor, non-exempt employees must be paid at least time and a half their regular rate of pay for hours worked over 40 in a workweek. A few details decide most overtime questions:

• The workweek is fixed. The Department of Labor defines it as a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods. It can start on any day and hour.
• Each week stands alone. Averaging hours over two or more weeks is not permitted. A biweekly pay period with 50 hours in one week and 30 in the other still contains 10 overtime hours.
• There is no federal daily limit. Some states add daily rules, covered below.
• Only hours worked count. PTO, holidays and sick time are not hours worked, so they do not count toward the 40 unless your own policy says so.
• Overtime is due on payday. The Department of Labor says overtime generally must be paid on the regular payday for the pay period in which it was earned.

For a worked example: Emily earns $19.00 an hour and works 46 hours. That is 40 × $19.00 = $760.00, plus 6 × $28.50 = $171.00, for $931.00. Our overtime calculator runs the same math for any rate and number of hours, and the guide on how to calculate overtime walks through five worked examples.

What goes into the regular rate

Overtime is 1.5 times the regular rate, not the base wage. The FLSA says the regular rate includes all pay for employment except payments the law itself leaves out: add up the week’s straight-time pay and divide by total hours worked. Overtime calculation software that only multiplies hours by the base wage gets this wrong.

In the example above, Tyler earns $18.00 an hour plus $2.00 for 11 closing hours, and works 44 hours. Straight-time pay is $792.00 + $22.00 = $814.00, so his regular rate is $814.00 ÷ 44 = $18.50 and the half-time premium on 4 overtime hours is 4 × $9.25 = $37.00. He is owed $851.00, a dollar more than if overtime were priced at his base wage. Our guide to shift differential pay covers flat and percentage differentials in more detail.

State daily overtime rules

Federal law sets the floor. Where state law is stricter, employers must follow whichever rule pays the employee more. A few states count overtime by the day as well as the week:

• California. Time and a half after 8 hours in a workday, after 40 in a workweek and for the first 8 hours on the seventh consecutive day of work in a workweek. Double time after 12 hours in a workday and after 8 hours on that seventh day. Each hour gets one premium. Our California overtime law guide has worked examples.
• Alaska. Overtime after 8 hours in a day as well as after 40 in a week, for covered employers.
• Nevada. Daily overtime after 8 hours in a 24-hour period for employees earning less than 1.5 times the state minimum wage, unless an alternative schedule applies.
• Colorado. Overtime after 12 hours in a workday or 12 consecutive hours, as well as after 40 in a week.

If you have staff in one of these states, run a real week with a long day through any tool you consider. Workzenly shows daily and weekly totals side by side on every timesheet. Tell us your state on the demo call and we will walk through how your overtime rules are set up.

This guide is general information, not legal advice. Overtime rules change and have exceptions, so check the U.S. Department of Labor, your state labor department or an employment lawyer for your situation.

Exempt vs non-exempt employees

Overtime rules apply to non-exempt employees. Every employee is non-exempt unless their job meets an exemption. For the federal executive, administrative and professional exemptions, that generally means being paid a fixed salary of at least $684 a week ($35,568 a year) and doing work that meets the duties test for the exemption. Job titles do not decide it, and paying someone a salary does not by itself make them exempt.

Several states set higher salary thresholds, including California, New York, Washington, Colorado, Alaska and Maine. A salaried shift lead under the threshold, or whose main job is serving customers, is owed overtime like anyone else, so keep recording hours for salaried non-exempt staff. Our guide to exempt vs non-exempt employees lists the duties tests and state thresholds.

How to control overtime cost

The cheapest overtime is the overtime you chose. A few habits keep it that way:

1. Check projected hours before you publish the schedule. If a draft week already has someone at 44 hours, fix it in employee scheduling, not on payday.
2. Watch the middle of the week. A mid-week overtime alert gives you two or three days to act.
3. Offer the shift to someone under 40. Let staff pick up or swap shifts in the app.
4. Fix missed punches the same day. A missed clock-out can turn an 8-hour shift into a 14-hour one.
5. Never refuse to pay overtime that was worked. Under the FLSA, hours worked must be paid even if overtime was not approved in advance. Handle unapproved overtime through your attendance policy, not by cutting pay.

How to choose overtime tracking software

Run one real week through every tool you are considering, with someone over 40, a differential or bonus, a missed clock-out and some PTO. Then ask:

• Does it count overtime from actual punches, or from hours typed in?
• Does it count each workweek separately inside a biweekly pay period?
• Does it include differentials and nondiscretionary bonuses in the regular rate?
• Does it keep PTO out of hours worked?
• Does it warn managers during the week, using the schedule, or only report overtime afterwards?
• Does approved overtime reach payroll as its own line at the overtime rate, without retyping?
• Is there an edit history when punches are corrected?

Overtime tracking works best inside a broader time and attendance system. Comparing vendors? Our list of the best time and attendance software covers the main options neutrally, and the timesheet templates are a free starting point if you are still on paper. If you want to see your own week counted in Workzenly, book a demo and we will set up a workspace with your company name before the call.