What is Double Time Pay and How to Calculate It

what is double time pay and how to calculate it

Mention the phrase 'double time pay', and many employee ears perk up. The very idea of being paid double their regular rate is enough for anyone to start thinking about the vacations they'll plan, the nice things they'll buy, and an extra fat pay packet.

But how does double pay come about? And what actually is it? Whether you're the giver or the receiver, read on to find out what you need to know about double time wages.

What is Double Time Pay?

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In simple terms, double time pay is a pay rate that you calculate as twice the regular rate pay that of an employee's standard pay rate. For example, if someone earned $15 an hour, they would make $30 an hour at double time.

Someone might be eligible for double time pay if they worked excess or overtime hours above and beyond their normal scheduled hours. They might also receive it if they have hours worked on a federal holiday.

Employees in a union may have a union contract that makes them eligible for double time wages. However, the Fair Labor Standards Act (FLSA) dictates that employees who are non exempt may not qualify for double time pay.

How is Double Time Pay Different from Overtime?

As an employer, it's crucial to understand the difference between being paid overtime and being paiddouble time they are not the same or interchangeable. While the FLSA does not regulate double time, it does regulate overtime.

If your employee works over 40 hours in one working week, they are entitled to overtime. Overtime is also not based on an employee's standard hourly rate, whereas double time pay is. Instead, overtime is generally paid out at time and a half for every hour over 40 hours an employee works.

Using the same example as before, an employee earning $15 an hour would be paid $22.50 per hour on their 41st hour and beyond.

Importance of Understanding Double Time Pay in Business

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We are fortunate to have access to high-end accounting software and experienced accountants to handle our business accounts for us. In saying that, it's helpful to understand the ins and outs of payment types. The more you know, the more on top of your business finances you can be.

If you are familiar with calculating the rate pay for double time, you are less likely to come across any surprises in your wages bill at the end of the working week.

Understanding the double time pay calculation process can also mean you may be less likely to miscalculate what you owe a staff member, which can often lead to overpayment or underpayment.

How to Calculate Double Time Pay

Now that you know what double time pay is and what it means for your business, why not learn how to calculate it? Of course, having the best accounting software for your business can take care of much of the hard work. Still, why not learn a few sums to make sure you can pay your employees correctly?

The Five-Step Process

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Step 1- Find out what rates apply. Read through your employee handbook and union contracts to find out the double time rate and what you legally have to pay your workers.

Step 2- Identify the hourly rate. Those on a salary may need to divide their salary into 41 weeks, then again by the full-time working hours of 40.

Step 3- Establish the eligible hours. Find out how many hours in your worker's week are eligible for double time pay. If, for example, they worked an eight-hour shift on a national holiday, then their eligible hours are eight.

Step 4- Calculate the pay rate. It's time to get out your calculator! As previously mentioned, if your employee earned $15 an hour (which is more than the US minimum wage) and worked eight hours of double time, you would need to pay them $30 an hour for those eight hours. For that day in total, you would need to pay them $240.

Step 5- Do the final tally up. Add the remainder of the working week at the standard pay rate to the day with double time. Double-check your figures before you submit the paycheck. Check with your accountant if you're not sure.

The Importance of Making Sure You Calculate Double Time Pay Correctly

Paying your employees can be a complex undertaking, especially if everyone is on different pay rates, and you have to factor in double time, overtime, part-time work, and full-time work.

Still, by being on top of the double time pay calculation process, you can reduce the risk of making incorrect payments to your team that can cost you more down the line.

Conclusion

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Double time pay may seem complicated, it but doesn't have to be. If your staff member is working beyond their scheduled hours or on a federal holiday, then they may be eligible for double time pay.

Do your homework to avoid confusion-

  • Union members are eligible for double time pay.
  • Double time pay involves paying a staff member double their wages for working beyond scheduled hours and on federal holidays.
  • Double time pay is different from overtime and is not regulated by the FLSA.
  • Familiarizing yourself with how double time works can ensure you don't underpay or overpay your staff members.