How should overtime pay be handled on payroll?

Handling Overtime Pay on Payroll in South Carolina

Overtime pay in South Carolina must comply with federal Fair Labor Standards Act (FLSA) requirements, as the state does not have additional overtime laws. Proper handling of overtime on payroll is essential for compliance and accurate employee compensation.

Operational Guidelines for Overtime Pay

• Calculate Overtime Rate: Overtime pay is required for non-exempt employees who work more than 40 hours in a workweek. The overtime rate must be at least 1.5 times the employee’s regular hourly wage.
• Track Hours Accurately: Implement reliable timekeeping systems to record all hours worked, including overtime. Accurate records support payroll accuracy and compliance during audits.
• Classify Employees Correctly: Ensure employees are properly classified as exempt or non-exempt. Only non-exempt employees are eligible for overtime pay under FLSA guidelines.
• Include Overtime in Payroll Processing: Adjust payroll calculations to include overtime hours at the correct rate. This affects gross wages, tax withholding, and benefit calculations.
• Handle Payroll Taxes: Overtime wages are subject to all applicable payroll taxes, including Social Security, Medicare, and federal and state income tax withholding. Ensure payroll systems apply these taxes correctly.
• Maintain Records: Keep detailed payroll records for each employee, showing hours worked, overtime hours, pay rates, and total compensation. South Carolina employers should retain records for at least three years.

Additional Operational Considerations

• Automate Payroll: Use payroll software that automates overtime calculations and tax withholdings to reduce errors and save time.
• Review Employment Agreements: Confirm that employment contracts or collective bargaining agreements do not conflict with overtime requirements.
• Stay Updated: As of 2026, monitor any federal or state regulatory changes affecting overtime rules or payroll tax rates.