Overtime Calculation
Overtime calculation is the process of identifying hours worked beyond the standard working week and applying the correct premium rate (typically 1.5x in the US, or standard rate in the UK unless contractually specified). Time tracking software that integrates with payroll must handle overtime rules correctly by jurisdiction.
RELATED CONCEPTS
UK vs US overtime rules
United Kingdom: UK employment law does not require overtime pay at a premium rate unless it’s in the employment contract. The legal requirement is that average pay, including overtime at whatever rate applies, must not fall below the National Living Wage / National Minimum Wage (£11.44/hour for workers 21+ from April 2024).
Most UK employer overtime policies offer one of:
- Standard time (1.0x) — most common for salaried employees
- Time and a half (1.5x) — common for hourly workers
- Double time (2.0x) — rare, usually for bank holidays
- Time off in lieu (TOIL) — extra time taken as leave rather than paid
UK time tracking software must accommodate TOIL tracking, not just premium rate calculation.
United States: The Fair Labor Standards Act (FLSA) requires overtime pay at 1.5x for non-exempt employees working more than 40 hours in a workweek. Some states have additional rules:
- California: overtime after 8 hours in a single day (daily overtime) in addition to weekly
- Daily overtime rules also apply in Colorado and Alaska
Time tracking software for US payroll must track both daily and weekly hours to calculate overtime correctly in California and similar states.
How time tracking tools handle overtime
| Tool | US overtime calculation | UK TOIL tracking | Daily overtime (CA) |
|---|---|---|---|
| Hubstaff | Yes | Partial | Yes |
| Clockify | Reporting only | Reporting only | No |
| Toggl Track | No | No | No |
| Harvest | Reporting only | No | No |
| QuickBooks Time | Yes | No | Yes |
The gap: Most SMB time tracking tools show total hours but don’t calculate overtime pay automatically. For overtime pay calculation to be reliable, you need either:
- A time tracking tool with native payroll integration (QuickBooks Time → QuickBooks Payroll, Hubstaff → Gusto/ADP), or
- A payroll tool that imports your time data and applies the correct overtime rules for each employee’s location
Overtime and salaried employees
In the US, the FLSA exempt/non-exempt distinction determines whether salaried employees receive overtime. Employees earning above the FLSA salary threshold ($684/week as of 2024) and meeting certain duties tests are exempt from overtime requirements. Below the threshold, salaried employees must receive overtime pay.
In the UK, there is no equivalent exempt/non-exempt distinction — all employees are entitled to the NMW as a floor, regardless of salary.
Practical implication for time tracking setup
If overtime calculation matters to your payroll:
- Ensure your time tracking tool can export hours by employee by day (not just by week) — daily hours are needed for California daily overtime
- Set up your payroll tool to receive time data in the correct format
- Test the integration with a known overtime scenario before your first live payroll run
- Document which employees are FLSA-exempt and configure your system accordingly
For purely billable-hours businesses (agencies, freelancers): overtime in the legal sense is less relevant — you’re billing time to clients, not calculating employee overtime pay. Your concern is utilisation (what percentage of time is billable) rather than overtime.