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Key points
  • Overtime is time worked in addition to normal working hours, usually paid at a higher rate

  • To add overtime to an employee's pay, set up a new pay item (see below for instructions)
  • The same approach can be used for penalty rates, weekend rates, or other additional pay rates

When does overtime apply?

In Australia the FairWork website is a good place to start. In New Zealand check the Employment New Zealand website.

If an employee takes time off instead of receiving paid overtime, see Time off in lieu.


OK, let's step you through how to set up overtime:

 

1. Set up an overtime pay item

Set up an overtime pay item

  1. Go to the Payroll menu and choose Pay items.
  2. Click Create earning.
    Pay items page with create earning button highlighted
  3. Set up the earning:
    1. For the Type, select Standard earning.
    2. Enter a Name for the earning such as "Overtime 2x".
    3. If you'd like a different, more personalised, name to show on payslips for this earning, enter a Name for payslip. Otherwise, this can be the same as the Name field.

    4. For the Rate, select Multiplier of normal rate.
    5. Enter a value in the Multiply by field. This will multiply the hourly rate by this value. For example, to pay double time you'd enter 2.
    6. Choose whether the overtime is Taxable or Non-Taxable. If unsure, check with your accounting advisor or the ATO/IRD.
    7. Select your country-specific options.

      If you're in...this option...means this...
      AustraliaPay super on this earningSelect this option if superannuation should be paid on the overtime. See the ATO guidelines for details about what should be included in super calculations. 
      Accrue annual and sick leave on this earningSelect this option if annual leave and sick leave should accrue on the overtime. If unsure, check with the Fair Work Ombudsman or your accounting advisor.
      ATO reporting categoryIf you report to the ATO via Single Touch Payroll, select the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO. Learn more about Assign ATO reporting categories for Single Touch Payroll.
      New ZealandExclude CECSelect this option if compulsory employer contributions should be excluded from overtime payments. If unsure, check with your accounting advisor or check the IRD website.
      Exclude from gross earnings for leave calculationsSelect this option to exclude overtime from gross earnings for leave calculations. As the IRD considers overtime part of gross earnings, you probably wouldn't select this. but check the IRD website. Learn more about Leave calculations.
      Don't accrue annual leave on this pay itemSelect this option if you don't want employees to accrue pro-rata annual leave on overtime. Note that employees with a fixed annual leave entitlement will never accrue leave on pay items.
    Here's our example overtime pay item:
  4. Click Save.
  5. Repeat these steps for each rate of overtime you pay, e.g. time and half, double time and a half, etc.
  6. When you're done, assign the pay items to your employees as described in the next task.
2. Assign the pay item to an employee

Assign the pay item to an employee

To include an overtime pay item in an employee's pay, you need to assign it to them. Here's how:

  1. From the Payroll menu, choose Employees.
  2. Click the employee's name.
  3. Click the Pay items - earnings & deductions tab.
  4. In the Earnings section, click the dropdown arrow next to the Add earning... field.
  5. Choose the overtime pay item to be assigned to the employee. The pay item is assigned to the employee.
  6. Repeat step 5 if you need to assign any additional pay items to the employee.
  7. Click Save.
  8. Repeat from step 2 to assign pay items to another employee.

OK, you're now ready to pay overtime when you do a pay run. See the next task for details.

3. Pay the overtime

Pay the overtime 

When an employee works overtime, enter the overtime hours on their pay.

  1. Go to the Payroll menu and choose Enter Pay.
  2. Select the employee to be paid then click Start Pay Run.
  3. Enter the Hours of overtime being paid. Here's an example of 2 hours double time being paid:
  4. Continue processing the pay as normal.

If you've previously set up pay items using a set rate you can delete these and use the new multiplier method above. See Modifying or deleting pay items for detailed instructions on deleting pay items.