How should overtime pay be handled on payroll?

Handling Overtime Pay on Payroll in Wisconsin

In Wisconsin, managing overtime pay correctly is essential for payroll compliance and employee satisfaction. Here is practical guidance on handling overtime pay on your payroll system.

Overtime Pay Requirements

• Federal and State Law Alignment: Wisconsin follows the federal Fair Labor Standards Act (FLSA) regarding overtime.
• Overtime Rate: Employees must be paid at least 1.5 times their regular hourly rate for hours worked over 40 in a workweek.
• Workweek Definition: A workweek is a fixed and regularly recurring period of 7 consecutive days.

Payroll Processing for Overtime

• Track Hours Accurately: Use timekeeping systems to record all hours worked, distinguishing regular and overtime hours.
• Calculate Overtime Pay: Multiply the employee’s regular hourly rate by 1.5 for each hour over 40 hours per workweek.
• Include Overtime in Gross Wages: Add overtime pay to regular wages before calculating payroll taxes.
• Withhold and Report Taxes: Deduct federal income tax, Social Security, Medicare, and Wisconsin state income tax from total wages, including overtime.

Additional Operational Considerations

• Employee Classification: Confirm employees are non-exempt under FLSA to determine overtime eligibility.
• Recordkeeping: Maintain detailed records of hours worked and overtime payments for at least three years.
• Payroll Automation: Utilize payroll software that automatically calculates overtime to reduce errors and ensure compliance.
• Reporting Requirements: Include overtime wages in quarterly and annual payroll tax filings with the IRS and Wisconsin Department of Revenue.

As of 2026, ensure you stay updated on any changes to federal or Wisconsin overtime regulations to maintain compliance and smooth payroll operations.