Using Pay Conditions to handle Complex Overtime Rates

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A common use of pay conditions for the automatic application of overtime rates.

This article will take you through the step by step process which will show how to use pay conditions to apply overtime to an employees timesheets.

Scenario

The scenario we’re going to handle with overtime is this:

  • An employee works a standard day of 7.6 hours
  • For the first two hours they work on a weekday over 7.6 hours, they are paid 1.5x their standard rate
  • For any hours after the first 2 hours of over time on a weekday they are paid 2.0x their standard rate
  • If the shift is longer than 9.1 hours then they will also receive a meal allowance

So for example, if an employee works 7am to 7pm (12 hours) on Thursday they should receive:

  • 7.6 hours at their standard rate
  • 2 hours at 1.5x their standard rate
  • 2.4 hours at 2.0x their standard rate
  • 1 x meal allowance

Pay Conditions Setup

Pre Setup

Before you begin to configure the pay conditions, first make sure you have set up:

  • A pay category to allocate 1.5x standard hours
  • A pay category to allocate 2.0x standard hours
  • A pay category to allocate meal allowances
  1. From the (Business) Payroll Settings” menu, select “Rule Sets” and add a new rule set or edit an existing rule set and click “Add Rules Now” for a new rule set or “Create Rules” for an existing rule set.

    image
  2. The first rule we need to create is the “Overtime 1.5x” rule. This will handle the first 2 hours of overtime and apply the 1.5x pay category. To do this, add a new rule to your rule set with the following details:
    • Rule Name: Overtime for first 2 hours after 7.6 @ 1.5x
    • When:
      “Hours Worked” are “between” “7.6 hours” and “9.6 hours”
      AND
      ”Day of week” is one of “Monday, Tuesday, Wednesday, Thursday, Friday”
    • Then: “Apply Pay Category” “Overtime @ 1.5x”

      image
      *note this rule uses the “And” condition to combine 2 criteria. To use the “And” condition, in the “When” section, select “And” and then you will be able to add multiple conditions to the “When” section

  3. The second rule we need to create is the “Overtime 2.0x” rule. This will handle any hours after the first 2 hours of overtime and apply the 2.0x pay category. To do this, add a new rule to your rule set with the following details:
    • Rule Name: Overtime for each hour after 2 hours @ 2.0x
    • When:
      ”Hours Worked” are “Over 9.6 hours”
      AND
      ”Day of week” is one of “Monday, Tuesday, Wednesday, Thursday, Friday”
    • Then: “Apply pay category” “Overtime @ 2.0x”

      image
      *note this rule uses the “And” condition to combine 2 criteria. To use the “And” condition, in the “When” section, select “And” and then you will be able to add multiple conditions to the “When” section

  4. The third rule we need to create is the “Meal Allowance” rule. This will allow a meal allowance to be applied to any shifts that are over 9.1 hours.
    • Please note: When setting up this rule, KeyPay does not provide a “Meal Allowance” pay category in the default business set up. You will first need to ensure that a “Meal Allowance” pay category exists by going to “Business –> Settings –> Pay Categories –> Manage Pay Categories”. If a “Meal Allowance” pay category does not exist, you’ll need to create one.
    • Rule Name: Meal allowance when hours worked greater than 9.1
    • When: “Shift Duration” is “Greater than 9.1 hours”
    • Then: “Add allowance” of “1 unit of Meal Allowance” and “Limit to 1 unit per day”
      image
      *note this rule is not limited to days of the week and will apply to any shifts greater than 9.1 hours
  5. Once you have setup these rules, you can easily test the rules by clicking on the “Test Rules” button.
    image
  6. Using the following test data:
    Tuesday: 7AM – 3PM, no breaks
    Wednesday: 7AM – 7PM, no breaks
    Thursday: 7AM – 3PM, 1 hour break
    Saturday: 7AM – 7PM, no breaks

    You can see the following output is generated

    image
    Tuesday has:
    24 minutes of overtime applied at 1.5x

    Wednesday has:
    2 hours of overtime applied at 1.5x
    2 hours 24 minutes applied at 2.0x
    1 unit of Meal Allowance applied

    Thursday has:
    No overtime or meal allowances applied

    Saturday has:
    No overtime applied
    1 x Meal Allowance applied

As you can see, by setting up 3 simple rules, KeyPay gives you a powerful way to process timesheets and accurately allocate hours worked to the correct overtime rates as well as assign additional advanced rate conditions such as meal allowances.

If you have any questions or feedback on setting up rules in KeyPay, please let us know via support@yourpayroll.com.au

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