Overtime Calculation and Costing

Overtime Calculation and Costing
Overtime  will follow the Federal guidelines outlined in the Fair Labor Standards Act (FLSA). FLSA establishes minimum wage, overtime pay, record keeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered, nonexempt workers are entitled to a minimum wage . Overtime pay at a rate of not less than one and one-half times their regular rate of pay is required after 40 hours of work in a work week.

Furthermore, the FLSA solution calculates the minimum overtime rate for nonexempt employees (even with multiple assignments in a Concurrent Employment situation) and remunerates them according to this FLSA overtime rate. This Overtime Blended Rate Calculation are used by many clients. The overtime blended rate will only apply to the premium portion of the overtime. This means that all hours worked will be remunerated at straight time and the FLSA rate will be used to calculate only the premium pay beyond 100%.

SAP provides a wide range of functionality and options in regards to the distribution of costs resulting from overtime. In a non-concurrent employee situation, an employee’s overtime premium costs will be distributed to a specified account in CATS. If no overtime account is available, the overtime premium will be distributed to the account when the overtime occurs.

SAP concurrent employment functionality results in certain customizations to be required for distributing the costs associated with an employee’s overtime premium pay over multiple assignments. When an employee has more than one position (CE assignments) and enters an overtime situation, certain decisions must be made on how the overtime premium costs should be distributed. For many universities , overtime premium costs will be distributed based on hours worked in each position. This method achieves the fairest possible solution while keeping data maintenance within reasonable confines.

 

Process Step

For many clients from legacy systems, overtime is calculated as 150% or more of hourly rate.  Best practices in SAP will provide the opportunity to move towards an overtime premium method which breaks overtime into the straight time portion and the FLSA overtime premium portion.

For example: If an employee works 48 hours and is paid $10 per hour. 48 hours will be paid at the straight time rate of $10 per hour and 8 hours will be paid at the FLSA premium rate of $5 per hour.

The FLSA rate calculation for a single assignment is achieved by:

  • Take all eligible FLSA      earning amounts
  • Take all eligible FLSA      hours
  • Divide earnings by hours

For example:

Description Hours Worked Rate of Pay Amount Paid FLSA Applicable
Regular Hours 40 $10 $400 Hours and Amount
Special   Event Time 3 $10 $30 Hours   and Amount
Shift   Differential 40 $0.50 $20 Amount
On   Call N/A N/A $50 Amount
Tool   Allowance N/A N/A $25 Not   Applicable
         
Overtime   Premium 3 $5.8139 $17.44 No

 

The calculation is completed as follows:

  • FLSA      amounts bucket = (400 + 30 + 20 + 50) = 500
  • FLSA      hours bucket = (40 + 3) = 43
  • FLSA      rate = (500/43) = $11.6279
  • Overtime      premium is paid at 50% of blended rate: $5.8139
  • Overtime      premium amount = $17.44

 

The FLSA rate calculation for multiple assignments (Concurrent Employment) will employ a blended or weighted rate concept.   To calculate:

  • Take all eligible FLSA      earning amounts from all assignments
  • Take all eligible FLSA      hours from all assignments
  • Divide earnings by hours

For example:

Description CE Assignment Hours Worked Rate of Pay Amount Paid FLSA Applicable
Regular Hours 1 25 $10 $250 Hours and Amount
Regular Hours 2 15 $12 $180 Hours and Amount
Shift   Differential 2 4 $0.50 $2 Amount
Special   Event Time 1 3 $10 $30 Hours   and Amount
On   Call 1 N/A N/A $50 Amount
Tool   Allowance 1 N/A N/A $25 Not   Applicable
           
Overtime   Premium   3 $5.95348 $17.79 No

 

The calculation is completed as follows:

  • FLSA      amounts bucket = (250 + 180 + 2 + 30 + 50) = 512
  • FLSA      hours bucket = (40 + 3) = 43
  • FLSA      rate = $11.90698
  • Overtime      is paid at 50% of blended rate: $5.95348
  • Overtime      amount = $17.79

 

The allocation of overtime premium costs will be in the control of each unit using a process developed for each institution.  A special attendance code can be created that allows units to designate an account that overtime premium should be charged to.  If time evaluation then determines that overtime has occurred the premium portion will be automatically charged to that account.  If overtime does not occur, then no charges will be incurred on that account.  In the case where no overtime premium account has been designated, by default, SAP will cost the overtime premium to the account designated for payment on the day when the employee enters the overtime situation.

This method will retroactively change the charges associated with the overtime premium.  If a unit has forgotten to specify an overtime premium account and wishes to do so retroactively, this solution will allow these changes through the normal time and payroll processes.  In addition to this functionality, units will be able to specify more than one account to charge the overtime premium to and the percent distribution among those accounts.

In the case of concurrent employment, an additional calculation is required to distribute the overtime premium costs to each assignment.  SAP will utilize a weighted distribution based on hours worked in each assignment.  Once the overtime premium has been split between assignments, the standard rules will apply as if it were a single assignment.

The table below illustrates an example of a concurrently employed person who has their costs split among different units .  The overtime premium cost will be spread out among Unit A and B based on the hours they worked.  The calculation is completed by taking hours worked in the position divided by total hours worked.

Position

Unit

Hours   Worked

Allocation   of Overtime Premium

       

1

 A

35

63.64%

 

 

 

 

2

 B

20

36.36%

     

 

   

55

100.00%