How to calculate overtime when your workweek is not Monday to Friday

The workweek is the unit, and it is yours to define

Federal overtime is calculated per workweek. A workweek is a fixed and regularly recurring period of 168 hours, seven consecutive 24 hour periods. It does not have to start on Monday. It does not have to start at midnight. It does not have to line up with your pay period, your calendar, or anybody’s expectations.

What it does have to be is fixed. You choose a day and an hour once, and it stays there. You cannot move it week to week, and you specifically cannot move it to avoid paying overtime. Changing it is permitted if the change is intended to be permanent and is not designed to evade the requirements, and it is the kind of change worth taking advice on.

Different groups of employees can be on different workweeks. A kitchen can run Monday to Sunday while a front of house team runs Sunday to Saturday. Each employee has one, and it has to be applied consistently.

Choosing well

For a shift business, the useful trick is to start the workweek at the quietest moment of your week, not at midnight on the busiest night. A bar whose Friday and Saturday shifts run past midnight will find that a workweek beginning at midnight on Sunday cuts a single shift in half, with the first part in one week and the rest in the next. Starting at, say, 4am on a Monday puts the boundary in a gap where nobody is working, and every shift falls cleanly into one week.

This is why our own location settings carry both a week start day and a workday start time rather than just the day. The second one is the field that solves the overnight problem, and it is the one most systems do not offer.

Forty per week, never eighty per fortnight

The most expensive overtime mistake in a biweekly payroll is averaging. An employee works 46 hours in the first week and 34 in the second. Eighty hours over the pay period, no overtime, everybody goes home.

That is wrong, and it is wrong by six hours of premium pay. Each workweek stands alone. The first week produced six hours of overtime and the second produced none, and the shortfall in the second week does not offset the excess in the first. There is no averaging across weeks for non exempt employees under the FLSA.

The reason this mistake is so common is that the pay period is the thing everybody looks at. The timesheet is grouped by pay period, the payroll file is built per pay period, the manager approves a pay period. The workweek is invisible in most of those screens, so the arithmetic quietly happens at the wrong boundary.

Ours splits a pay period into its real workweeks before the overtime calculation runs, every time, on every surface: the timesheet, the reports, the payroll file and the employee’s own view of their hours. One function does it and every screen calls it, so the timesheet and the payroll file cannot disagree about what week a Saturday belonged to.

The regular rate is not the hourly rate

Overtime is paid at one and a half times the regular rate, and the regular rate is a calculated figure rather than the number on somebody’s offer letter. It is total straight time compensation for the week divided by total hours worked.

For an employee paid a flat hourly rate with nothing else, those are the same number and there is nothing to do. They diverge the moment anything else is added, and several common things count.

• Shift differentials. An extra dollar an hour for nights goes into the regular rate, so overtime on a week containing night shifts pays more than time and a half of the base rate.
• Nondiscretionary bonuses. A bonus promised in advance for hitting a target, for attendance, or for productivity is part of the regular rate and has to be allocated back across the period it was earned in. A genuinely discretionary gift, decided after the fact with no promise, is not.
• Multiple rates. An employee who works some hours as a server and some as a bartender at different rates has a regular rate that is the weighted average of the two for that week.
• Most tips, no. Tips themselves are generally not part of the regular rate, though the tip credit arrangement affects the arithmetic in its own way.

A premium for a holiday matters here too, and in a direction that surprises people. A premium of at least one and a half times the regular rate for working a holiday is creditable toward overtime, and a smaller premium is not, which makes a token holiday bump worse than useless from a compliance point of view. It is the reason our own holiday pay rule offers one and a half or two and nothing in between.

States with daily overtime

Federal law has no daily overtime. Twelve hours in one day and twenty eight across the rest of the week is forty hours and no premium, as far as the FLSA is concerned.

Several states disagree, and California most consequentially. California pays overtime at one and a half after eight hours in a workday, double time after twelve, and has a rule for the seventh consecutive day worked in a workweek. Alaska, Nevada and Colorado have daily rules of their own with different triggers and different conditions, and Nevada’s turns on the employee’s wage relative to the minimum wage, which means a payroll system that does not hold wages cannot evaluate it at all.

Two rules follow for anyone operating across state lines.

1. No pyramiding. An hour that already earned a daily premium does not earn the weekly one as well. You pay the higher of the two, not both.
2. The location governs, not the head office. An employee working in California gets California’s rules whatever state your business is registered in.

We ship the California ruleset as an option rather than as the default, and the option only appears for a business that actually has a California location. A one item choice on a settings page is a question with one answer, and showing daily overtime rules to a business in New Jersey is a way to get them configured wrongly by somebody being thorough.

Four mistakes, in rough order of cost

Averaging across the pay period

Covered above. It is the most expensive because it is systematic, it applies to everybody, and it persists for as long as the payroll runs that way.

Counting the overnight shift in the wrong week

A shift starting at 10pm Saturday and ending at 6am Sunday belongs somewhere, and if your workweek boundary sits at midnight it belongs to two places. It is also one of the first things to check when two systems disagree about an hour. Systems handle this differently and many handle it badly. Ask yours directly, with a real example, before you trust it.

Forgetting that unauthorized overtime is still overtime

If an employee works hours you did not approve, you still have to pay for them, including the premium. You can discipline somebody for working unapproved hours. You cannot decline to pay them. The rule is that work you suffer or permit is work you pay for, and that includes work you would have stopped if you had known.

Treating a salary as an exemption

Paying somebody a salary does not by itself make them exempt from overtime. Exemption depends on the duties actually performed and on meeting a salary threshold, and a shift supervisor who spends most of their week doing the same work as the team they supervise is very often not exempt regardless of how they are paid. This is the mistake most likely to be made in good faith by a small business promoting somebody internally.

A short checklist

1. Write down the workweek. Day and hour. Put it somewhere staff can see it, not just in a settings screen.
2. Check that your system splits pay periods into workweeks before calculating, and test it with a real 46 and 34 fortnight.
3. List everything besides base pay that an employee can earn, and check which items belong in the regular rate.
4. Check the daily overtime rules for every state you operate in.
5. Look at your exception list weekly for shifts running long. Paying overtime you planned is a cost. Discovering it at payroll is a surprise.

Overtime is one of the few areas where doing the arithmetic correctly is genuinely cheaper than doing it approximately, because the corrections carry penalties and the errors are systematic rather than one off. It is worth an afternoon.