Lesson 1: Income - Calculating Overtime Pay

   Constructing Knowledge

Calculating gross pay, when some of the hours worked are to be paid at an overtime rate, requires a few steps.

  1. Read the situation to identify which overtime rules apply. If there are no specifics given, assume the overtime is according to Alberta labour standards.
  2. Calculate all regular pay. Regular pay can be added up for the whole pay period.
  3. Calculate the overtime rate of pay. Typically this will be the normal rate of pay multiplied by 1.5, but it may vary in certain situations.
  4. Identify the overtime hours. Be sure to check for over 8 hours in a day and for over 44 hours in a week.
  5. Multiply the overtime rate of pay by the number of overtime hours.
  6. Add together the regular pay and the overtime pay to determine the gross pay.

   Multimedia

A video describing the calculation of overtime is provided.


EXAMPLE 1

Rahim works in a local electronic retail shop and earns $12.50 as his regular hourly rate of pay. One week, a co-worker fell ill, and Rahim worked extra shifts to help out his boss. In total, Rahim worked 54 hours that week. What was Rahim's gross pay for the week?

Solution


Step 1: Overtime rules

No specific overtime rules are given, so all hours over 44 will be overtime, paid at 1.5 times the regular hourly pay.

Step 2: Regular pay

regular pay = $12.50 × 44 hours
= $550.00

Step 3: Overtime rate of pay

overtime rate of pay = $12.50 × 1.5
= 18.75

Step 4: Number of overtime hours

overtime hours = 54 - 44
= 10 hours

Step 5: Overtime pay

overtime pay = $18.75/hour × 10 hours
= $187.50

Step 6: Gross Pay

gross pay = $550.00 + 187.50
= $737.50

Rahim earned $737.50 for his week of work.

EXAMPLE 2

Angie worked shifts of 6, 10, and 7 hours last week. Her normal rate of pay is $14.25 per hour. Her employer pays double time for any overtime hours. What was Angie's gross pay for her week of work.

Solution


Step 1: Overtime rules

Overtime pay is double time. This means her regular hourly rate of pay will be multiplied by two. No other rules were given.

Step 2: Regular pay

One day was a 10 hour day, so only 8 hours of that day will be calculated at Angie's regular rate of pay.

regular hours = 6 + 8 + 7
= 21 hours
regular pay = $14.25/hour × 21 hours
= $299.25

Step 3: Overtime rate of pay

overtime rate of pay = $14.25 × 2
= $28.50/hour

Step 4: Number of Ovetime hours

overtime hours = 10 - 8
= 2 hours

Step 5: Overtime pay

gross pay = $28.50/hour × 2 hours
= $57.00

Step 6: Gross pay

gross pay = $299.25 + $57.00
= $356.25

Angie's gross pay was $356.25 for her week of work.


Now, it is your turn! Complete the questions in your Chapter 1, Lesson 1 Practice Makes Perfect that refer to Overtime.



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