The short answer: overtime pay is the extra rate paid for hours worked beyond normal hours — often the normal hourly rate multiplied by an overtime factor. Deductions (taxes, advances, contributions) are then subtracted from gross pay to reach net pay. The key is consistent rules and accurate hours; the exact overtime rate depends on your local labour law.
Calculating overtime
First, know the employee’s normal hourly rate. Overtime hours are usually paid at that rate times an overtime multiplier set by your rules or local law. Overtime pay = overtime hours × hourly rate × overtime multiplier.
A worked example
Suppose an employee earns 200 per hour and works 10 overtime hours in a month, with an overtime rate of 1.5×. Overtime pay = 10 × 200 × 1.5 = 3,000, added to their normal pay. Using the wrong multiplier — or the wrong hours — is exactly where disputes start, so both must be accurate.
From gross to net: deductions
- Start with gross pay — normal pay + overtime + any bonuses.
- Subtract taxes and statutory contributions per local rules.
- Subtract advances and loan repayments already given.
- The result is net pay — what the employee receives.
Where errors creep in
- Wrong overtime hours (poor attendance tracking).
- Wrong overtime multiplier.
- Forgotten advance recoveries.
- Inconsistent rules between employees or months.
Calculate it automatically
RushFlow takes accurate hours from attendance, applies your overtime rules and deductions, and produces correct net pay and payslips — so overtime and deductions are right every time. See the live demo, or read payroll basics. (Confirm overtime rates with your local labour law.)