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Accounting for Overtime Pay in the Budget

A critical business tool is an accurate budget. One component of a budget for small businesses with employees is overtime pay, which is the premium paid for overtime hours worked in excess of the normal wage rate. In Canada, for most employees, overtime begins once a person works over 44 hours in a week, and is due at 1.5 times the employee’s hourly rate. Budgeting accurately for this takes time and trial and error.

Assume a business owner calculates the average employee rate to be $15 per hour, and the average number of hours worked per week to be 48. The overtime budget per employee per week would be:

($15 x 1.5 x (48 – 44)) = $22.50 x 4 = $90

With time and more data, this estimate can be honed to something more accurate.

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