An Overtime Premium refers to the half-time, or .5, in time and one-half (1.5). The rest of the overtime earnings are applied as part of Regular Earnings.
Check out our OT Premium guide for more details.
So...why is it paying my workers at only half their regular rate?
This is by design. Your workers are paid for all hours worked at their standard rates under Regular Earnings. But any hours that are considered Overtime Earnings get an Overtime Premium--this makes up the .5 of the 1.5 rate of pay.
Let's dig into an example together.
For example, Bob works 20 hours as a mechanic and 25 hours as a supervisor during the week. Bob earns $20 per hour as a mechanic and $25 per hour as a supervisor. So, Bob’s regular earnings would be $900 for the regular 40 hours worked that week. His 5 hours overtime would break down as follows:
20 hours at $20 per hour = $400 Regular Earnings
20 hours at $25 per hour = $500 Regular Earnings
5 hours at $25 per hour = $125 Overtime Regular Earnings
5 hours at $12. 50 per hour = $62. 50 Overtime Premium Earnings
5 hours of Overtime = $187. 50 Total Earnings
Bob would receive $900 of Regular Earnings and $187. 50 of Overtime Earnings.
So in the time and one half, or 1.5, calculation of Overtime, then $125 represents the 1 and the $62. 50 represents the .5. The $62.50 will be categorized as the Overtime Premium Earning on the worker's pay statement.