How should overtime pay be handled on payroll?

Handling Overtime Pay on Payroll in Connecticut

In Connecticut, managing overtime pay correctly is essential for payroll compliance and employee satisfaction. Overtime rules align with federal Fair Labor Standards Act (FLSA) requirements, but state-specific practices should be observed.

Overtime Pay Requirements

• Overtime Rate: Pay non-exempt employees at 1.5 times their regular hourly rate for hours worked over 40 in a workweek.
• Workweek Definition: The standard workweek is any fixed and regularly recurring period of 7 consecutive days.
• Exempt vs. Non-Exempt: Confirm employee classification to determine overtime eligibility. Exempt employees are not subject to overtime pay rules.

Payroll Processing for Overtime

• Accurate Timekeeping: Implement reliable time tracking systems to record hours worked, including overtime.
• Calculate Overtime Pay: Multiply the regular hourly rate by 1.5 for each hour over 40 in the workweek.
• Include Overtime in Gross Wages: Reflect overtime pay in the employee’s gross wages for tax withholding and reporting.
• Tax Withholding: Withhold federal income tax, Social Security, Medicare, and Connecticut state income tax appropriately on overtime earnings.

Compliance and Recordkeeping

• Maintain Records: Keep detailed records of hours worked and overtime payments for at least three years to meet state and federal requirements.
• Reporting: Accurately report wages, including overtime, on payroll tax returns and employee W-2 forms.
• Stay Updated: As of 2026, regularly review Connecticut labor regulations and federal guidelines to ensure ongoing compliance.

Operational Tips

• Automate Calculations: Use payroll software to automate overtime calculations and reduce errors.
• Employee Communication: Clearly communicate overtime policies and pay rates to employees to avoid misunderstandings.
• Review Employee Classification: Periodically audit employee roles to ensure correct exempt or non-exempt status for overtime eligibility.