Eighteen percent of businesses pay employees semimonthly. If you use semimonthly pay periods and have nonexempt employees who work overtime, read on. We’ll break down calculating overtime for semimonthly pay periods (complete with examples!).
What is a semimonthly pay period?
Semimonthly pay is a type of pay frequency where employers pay employees twice per month. Employees receive a total of 24 paychecks under a semimonthly schedule. Employers pay employees on specific dates, such as the 15th and 30th of each month. As a result, payday can fall on any day of the week. And, pay periods are inconsistent, which can make paying hourly employees a challenge.
Semimonthly payroll is one of four popular frequencies employers can choose from. Other common frequencies include weekly, biweekly, and monthly.
The majority of states have pay frequency laws that determine how often employers must run payroll. Not all states let employers choose a semimonthly pay period. For example, Massachusetts employers can only pay hourly employees weekly or biweekly.
What is overtime?
Overtime is time and a half an employee’s regular pay for each hour worked over 40 in a workweek. You must pay nonexempt employees overtime wages under the Fair Labor Standards Act (FLSA).
Let’s say you have a nonexempt employee, Brittany, whose regular pay is $18 per hour. Brittany works 45 hours one workweek, so she is entitled to five hours of overtime pay.
To find Brittany’s overtime pay, multiply her overtime rate by the number of hours of overtime worked:
Overtime Pay: ($18 X 1.5) X 5 hours of overtime = $135
Now, find her regular wages by multiplying her regular pay by 40 hours worked:
Regular Pay: $18 X 40 hours = $720
Lastly, add together Brittany’s overtime and regular wages to get her total gross wages:
Total Pay: $720 + $135 = $855
Although the federal FLSA requires overtime pay for hours worked beyond 40, states may set stricter laws. For example, California has a state overtime law. The law requires overtime for time worked beyond 40 hours in a workweek, eight hours in a workday, or six days in a workweek.
Consider reliable time and attendance software to make sure you know employee hours worked per day and workweek. Depending on the software, you may be able to customize overtime rules to stay compliant with state laws.
Calculating overtime for semimonthly pay periods
Running semimonthly payroll can be confusing if you have hourly employees, especially when those employees work overtime.
How you handle semimonthly overtime depends on your scheduled workweeks. What is a workweek? A workweek is a fixed period of seven consecutive 24-hour periods. Pay close attention to when an employee’s workweek begins and ends. Remember, you must pay overtime if a nonexempt employee works more than 40 hours in a seven-day workweek.
Again, semimonthly pay periods are inconsistent. They may not fit within the typical seven-day workweek. As a result, you may have employees who work overtime during a week that is split between two pay periods. So, what do you do?
For a semimonthly payroll overtime calculation, take both the workweek and the pay period into account.
Take a look at the following overtime semimonthly payroll steps:
- Count the total hours worked for the entire first workweek associated with the pay period, even if the workweek is split between different pay periods.
- Add up the total number of hours for every workweek in the pay period. If any workweek exceeds 40 hours worked, you owe overtime.
- If the final workweek of the pay period is split between the current semimonthly period and the following pay period, provide overtime during the period where overtime is earned.
Here’s the bottom line: Overtime hours are paid in the pay period that the overtime hours are earned.
Overtime for semimonthly payroll examples
Let’s take a look at a couple of examples of how calculating overtime for semimonthly pay periods works. The first example is a situation where an employee does not receive overtime during a semimonthly pay period. The second example is a situation where an employee does.
Example 1: No overtime earned by end of pay period
Let’s say that this is the last week of a semimonthly period. Your employee, Barb, worked 12 hours each day for five days. She worked a total of 60 hours. But, the workweek is split between two pay periods.
The first three days of the week are the last three days of the pay period, and the last two days of the week are the first two days of the next pay period.
Although Barb worked a total of 60 hours during the workweek, she only worked 36 hours for the second week of the pay period. Because she didn’t earn overtime by the last day of the pay period, there is no overtime earned. However, the overtime hours will be shown in the following pay period.
Example 2: Overtime earned by end of pay period
Fast forward to the following pay period, but the same workweek as above. This is the pay period where you must pay Barb for overtime worked.
Again, Barb worked 36 hours from Monday through Wednesday, which were part of the previous pay period. She worked 24 hours on Thursday and Friday, which are part of the new pay period.
Barb worked a total of 60 hours this workweek. Overtime is any time worked beyond 40 in a workweek. So, she worked 20 hours of overtime (60 – 40).
You must pay Barb 20 hours of overtime during this pay period because this is the pay period she earned the overtime.
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This is not intended as legal advice; for more information, please click here.