In payroll accounting, how is overtime typically paid?

Overtime is typically paid at a higher rate than the standard pay to compensate employees for working beyond their regular hours. This higher rate is often defined by labor laws and company policy. In many jurisdictions, the Fair Labor Standards Act (FLSA) in the United States mandates that non-exempt employees must be paid at least one and a half times their regular hourly wage for hours worked over 40 in a workweek. This premium pay for overtime serves as both a financial incentive for employees to work extra hours and a regulatory measure to discourage excessive work without adequate compensation.

This system of paying a higher rate recognizes the increased effort and potential burden that extended hours may place on employees, thereby promoting fair labor practices. Consistently applying this standard allows for clear expectations regarding compensation when employees take on more work than is standard.