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How to figure your overtime credit?
If you pay overtime you may exclude one third (time-and-a-half) of the gross overtime amount from your premium basis. YOU MUST MAINTAIN RECORDS TO SHOW OVERTIME PAY SEPARATELY BY EMPLOYEE.
Here’s an example of one employee who has worked 44 hours this pay period (40 hours regular time, four hours overtime) and whose regular rate of pay is $10 an hour ($15 an hour for the overtime rate, or, time-and-a-half pay). His total gross pay was $460 for the week:
| Employee | M | T | W | Th | F | Total Hours |
| John Doe | 8 | 8 | 10 | 9 | 9 | 44 |
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| 40 hours @ $10/hour |
= $400 Regular Pay |
| 4 hours @ $15/hour |
= $60 Overtime Pay |
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$460 |
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There are two ways you can figure your overtime credit.
1) The first way is the Straight Time Calculation Method where all you do is take the number of hours worked in a pay period (44), and then multiply those hours by the regular rate of pay ($10 per hour):
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Straight Time Pay Calculation:
44 Hours Worked (x) $10 = $440 Total Straight Time Pay
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$440 is the total amount of reportable payroll in this example.
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2) The second way is the Regular Pay Calculation Method where all you do is take the gross overtime amount ($60) and then divide that amount by 3 (1/3rd, or, the time-and-a-half rate):
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Regular Pay Calculation:
$60 Total Overtime Pay (/) 3 = $20 Total Excluded Overtime Pay
Once you know what your excluded overtime amount is ($20), then you subtract that total from the total gross pay ($460).
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$460 (gross pay) (-) $20 (Total Excluded Overtime Pay) = $440
$440 is the total amount of reportable payroll in this example. You came to the same amount of reportable payroll
($440) as in the example above, but you were able to figure it in two different ways. So, depending on how you
keep your books, there are two ways of calculating your overtime credit!
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