A How-To Guide For Calculating Double Time Pay

Payroll is one of those things that can drive a small business owner up the wall. The time-consuming, data-entry-driven task can take up to five hours a month. So just the thought of calculating double time pay for your business may be setting off red flags in your mind. But offering double time is a great incentive to motivate employees and ensure you’re fully staffed on those not-so-desirable shifts you’re constantly struggling to fill. At the very least, it’s worth considering. You might be asking yourself, “What is double time pay?” And that’s a great question. We’ll cover what it is, why it isn’t overtime pay, the laws surrounding double time pay, and how to calculate it when you run payroll.

What is double time?

Double time pay is a form of overtime pay that involves paying out overtime hours at twice an employee’s regular rate. Employees who work beyond their regularly scheduled shifts may be eligible for double time pay. Double time pay is also common when employees work on federal holidays—it’s often called holiday pay. If and when an employee receives double time pay, it depends on various factors, including exempt and nonexempt employees and state and federal laws.

Double time pay versus overtime pay: What’s the difference?

Double time pay is a pay rate that’s paid out at two times an employee’s standard hourly rate. This is different from overtime pay, which is typically paid out at a rate of 1.5 times an employee’s normal hourly rate when employees work more than 40 hours per week. Let’s look at how this works with Lila at her job, where she makes $20/hour. If Lila works 25 hours in one week and comes in to cover for a four-hour Sunday shift (during which time you pay double time), her paycheck would look like this:

• 25 hours at her regular rate ($20/hour)
• Four hours at her double time rate ($40/hour)

If Lila then had to step up to cover for a coworker on paid time off (thanks, Lila!) and worked 47 hours in one week, she’d also be eligible for overtime pay. Her paycheck would include:

• 40 hours at her regular pay rate ($20/hour)
• Seven hours at 1.5 times her regular pay rate ($20 x 1.5 = $30.00/hour)

When is double time pay mandatory?

Double time pay is rarely mandatory from a legal standpoint. Businesses aren't required to offer double time pay. State and federal laws regulate overtime pay, but only a few states require employers to pay double time. However, some union rules govern double time pay, so if your employees are part of a union, be sure to check the regulations. Some businesses offer double time pay as an incentive or an added employee benefit, but it isn’t a legal requirement. Some instances when you might use double time pay include:

• Holiday shifts
• Irregular or “less desirable” shifts—think weekends and early mornings
• Overtime hours worked after a certain amount of time—for example, for over 55 hours per week, you could offer double time pay.

Of course, there are some rules and regulations when it comes to double time pay.

The Fair Labor Standards Act

To effectively use double time pay, you need to understand the difference between exempt and nonexempt employees as outlined in the Fair Labor Standards Act (FLSA). According to the FLSA, only nonexempt employees are eligible for overtime and double time pay. Nonexempt employees are typically paid by the hour, and by law, they must receive at least 1.5 times their regular hourly rate for any hours worked over 40 hours in a single workweek. If employers don’t pay overtime to their employees, they can face fines and legal action until the problem is resolved. Exempt employees aren’t eligible to collect double time pay or overtime. Exempt employees are individuals who are in salaried positions. It’s also worth noting that overtime and double pay isn't required for work on weekends, holidays, or days of rest unless a person is working overtime on those days. But many employers offer double time to encourage employees to work those days.

State laws

While there are no federal laws that require employers to pay double time, some states have regulations that make double time pay mandatory in some situations. California has a law that requires employers to pay double time in certain cases: Employment beyond eight hours in any workday, or more than six days in any workweek, requires the employee to be compensated for the overtime at not less than:

• One and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek; and
• Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

Make sure you’re paying your employees the correct rates for the right times by looking into your state and local labor laws and regulations, or working with a payroll system that does!

Best practices for double time pay

If you decide to use double time pay in your business, the best thing to do for you and your employees is to create a clear policy to govern double pay. If you’re in a state that requires double time pay, the policy should reflect your state’s standards. But if you aren’t required by state law to offer double time compensation but choose to do so, a double time policy can help streamline the process and make sure you and your team are on the same page. Before you start putting your policy in place, confirm that your current overtime policy is FLSA compliant. Next, spend some time doing market research to learn about any industry standards that exist for double time. It’s always helpful to know what your peers are doing for their employees—it can help keep you competitive as an employer. Decide when you’ll offer double time pay to your employees. Again, double time pay isn't required, so this is entirely up to your discretion. Ask yourself the following questions to start to form your policy:

• Will you offer double time for working on holidays?
• Will you offer double time for irregular, split, or undesirable shifts?
• What are the “undesirable” shifts that will earn double time pay?
• Will you offer double time pay after a certain number of hours worked daily?
• Will you offer double-time pay after a certain number of hours worked overtime?

Once you’ve answered these questions, you’ll have a clear understanding of how your double pay policy will work. The final step is writing down your double-time pay policy and sharing it with your employees. Add it to your employee handbook so all current and future employees can access the policy easily and quickly.

How to calculate double time for payroll

Calculating double time is a straightforward process made up of several key steps. If you follow these simple steps, you can figure out your employees’ double time pay rates and make sure you’re fairly compensating your employees for any eligible hours worked.

Step 1: Determine when double time applies for each employee

Check with your double time pay policy to see when double-time pay is applicable. If you have a standard policy with the same rules for all employees, you may have it memorized. But with more complicated policies, keeping it with you as you process payroll is worthwhile.

Step 2: Verify the employee’s hourly rate

Not all of your employees will be on the same pay rate—that’s why it’s essential to spend some time verifying their hourly rate before double time.

Step 3: Determine the number of eligible hours

Find out how many hours an employee worked that are eligible for double time pay. While you may have a process to ensure employees accurately log their hours, triple-checking the information is always a good idea. Check their logged hours, how much they worked during the week, and if they worked any holidays or designated “double time pay” shifts. It’s incredibly important to keep accurate records to ensure pay is accurate and you stay compliant with state and federal laws and regulations.

Step 4: Calculate the double time hourly pay rate

Now that you know how many hours an employee has worked at a double time rate, it’s time to do the math. Double their hourly rate and multiply the double time rate by the number of eligible hours worked. That will give you the employee’s double time pay.

Step 5: Find the total pay for the pay period

Take the double time pay you just calculated and add it to the regular pay to get the total pay for an employee. Make sure you check your calculations to avoid human error.

Example of calculating double time pay

Let’s take what we just learned and put it into action. We’ll use the example of Lila again.

Step 1

Lila’s work pays double time for:

• Sunday shifts
• Shifts worked on federal holidays
• Overtime hours above 50 hours per week.

Step 2

We know that Lila’s hourly rate is $20/hour.

Step 3

Over the last pay period, Lila worked 40 hours. Five hours were during a Sunday shift, and another three hours were on the Fourth of July.

Step 4

Because Lila worked five hours on a Sunday and three hours on the Fourth of July, she's entitled to eight hours of double time pay. Here’s how to calculate the double time pay Lila is owed:

Double time pay = (Regular pay rate x 2) x Any time that exceeds regular hours

($20 x 2) x 8, or, $40 x 8

Double time pay = $320

You’re now ready to calculate Lila’s regular pay to determine her total pay for the pay period.

Step 5

Next, you need to calculate Lila’s pay for the other 32 hours that didn’t fall into the double time category.

Lila’s hourly rate is $20/hour, so her regular pay would be:

Regular pay = Regular pay rate x regular hours, or, $20/hour x 32

Regular pay = $640

Now, add the double time pay and regular pay together to get Lila’s total paycheck for the week:

Total pay = Regular pay + Double time pay, or, $320 + $640

Total pay = $960

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