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How Overtime Pay payroll items work

How QuickBooks calculates the Overtime Pay payroll item's rate

The Overtime Pay payroll item is a multiplier. It does not necessarily have a rate of its own. Instead, QuickBooks bases its rate on the value of the multiplier you chose when you created the payroll item multiplied by the rate for the Regular Pay payroll item above it in the employee record or paycheck.

Example

Let's say time-and-a-half is an overtime pay payroll item. The multiplier you chose when you created the payroll item is 1.50.

Overtime payroll item

When you tab from the Item Name column to the Rate column, QuickBooks automatically calculates the rate for the Time-and-a-Half payroll item by multiplying 1.50 times the rate for the Regular Pay payroll item above it and gives it a rate of 30.00. (1.50 x 20.00 = 30.00)

Overtime rate calculation

Entering Overtime Pay payroll items in the correct order

When used as a multiplier, an Overtime Pay payroll item's rate is ultimately set on the paycheck. It must follow the Regular Pay payroll item on which it is based in order for QuickBooks to calculate the appropriate overtime rate. The best way to ensure this is to set up your payroll items in the correct order on the employee record.

If an employee has two Regular Pay payroll items

If an employee has two Regular Pay payroll items, you must create two Overtime Pay payroll items and make sure that they follow the correct Regular Pay payroll item in the Earnings table on the employee record and on the employee's paychecks.

Example

Let's say you have a catering business and you pay different rates for setup/cleanup than for serving. Let's say you have an employee show performs both tasks and also earns time-and-a-half overtime for each kind of task. For example, at an event one day, they work setup/cleanup and earn both regular hours and overtime. The next day, the employee does the serving and earns both regular hours and overtime.

In this case, you need:

  • Two regular pay payroll items (Regular Pay-Setup, Cleanup and Regular Pay-Serving)

  • Two overtime pay payroll items (Overtime-Setup, Cleanup and Overtime Pay-Serving) whose multiplier you set to 1.5 (for time-and-a-half)

  • To make sure that each overtime item follows the correct regular pay item in the Earnings table on the employee's paycheck

The Earnings table on the paycheck should look like this:

Multiple regular and overtime items

Notice how in the Rate column, each Overtime Pay payroll item picks up the correct rate from the Regular Pay payroll item above it. The overtime rate for setup/cleanup is $15.00, or 1.5 x $10, where $10 is the regular pay rate for setup/cleanup. Similarly, the overtime rate for serving is $18.75, or 1.5 x $12.50, where $12.50 is the regular pay rate for serving.

Transferring time from timesheets

When an employee has two Regular Pay and two Overtime Pay payroll items, and you transfer their time to their timesheets to their paychecks, you should always review their paychecks to make sure the payroll items are appearing in the correct order. If they are not, re-order them so that the Overtime Pay payroll items follow their corresponding Regular Pay payroll items.

Specifying a fixed rate

If you prefer, you can specify a fixed rate for an Overtime Pay payroll item by entering your own rate on either the employee record or the paycheck. QuickBooks will use that as the rate.

Exceptions

In the following situations, QuickBooks will override the specified rate for an overtime pay payroll item and recalculate it in relation to the regular pay payroll item above it:

  • You change the rate of the regular pay payroll item above the overtime pay payroll item

  • You insert a new regular pay payroll item directly above the overtime pay payroll item

  • You delete the regular pay payroll item directly above the Overtime Pay payroll item

  • You change the name of a regular pay payroll item directly above the Overtime Pay payroll item

Note: If you use the Workers Compensation feature, we recommend that you do not enter a fixed rate for overtime pay payroll items because QuickBooks will not be able to back out overtime premiums if you do.

See also

KB ID# H_PAY_INFO_OT_HOWWORKS
9/30/2016 1:16:52 PM
PPRDQSSWS407 9138 Pro 2017 4b4edc