A challenge common people face is that the payroll terminology is not a simple walk in the park, particularly when we talk about additional employee compensation like overtime and double time. What exactly is overtime, and what is double overtime? And how are they different?
Understanding these two terms well is very important as misinterpreting can result in non-compliance with labor laws, increased costs, and even legal repercussions.
These terms, double time, and overtime, can be confusing for people. This blog is a step-by-step discussion of overtime vs double time, so you are in a position to remunerate the workers accordingly.
Let’s start.
Purpose of Double Time and Overtime
In essence, overtime and double time mean additional compensation and benefits for workers who are putting in more than the normal allocated time. These premises are laid down by the law either that is it the Federal Act of Labor or the state-based workforce provisions.
Why Should Employers Understand Overtime vs. Double Time?
Is sorting out differences between overtime and double-time pay the only goal for your understanding of these terms? The answer is, no. There is much more that you will benefit from as it enables you to do the following:
- Ensure the employees get overpaid time to which they are entitled – both regular and time-and-a-half of the rate. Let them take home the right amount by receiving the appropriate rate.
- Abide by the labor laws. This will ensure a just and legal workplace. Failure to oblige by these laws may result in legal penalties such as back pay and fines, or even a lawsuit.
- Secure your image. Underpaying legally required overtime wages can harm your brand and result in future business loss. For example, applicants will not apply for your positions if they know about your delayed compensation routine regarding overtime and full overtime. Thus, customers, clients, and other organizations may choose not to engage with your business.
What Is Overtime?
Overtime is working extra hours at the standard workweek. Generally, the normal weekly work time is 40 hours. When an employee works more than this standard 40 hours, they’re paid what’s known as overtime pay.
Traditionally, the typical overtime pay is 1.5 times the employee’s regular wage rate. For example, if your employee earns a regular wage of $20/hour but works 45 hours in a week, they’ll earn $30/hour for 5 of those hours.
What Is Double Time?
Double time, otherwise called double overtime, is the rate of pay at which an employee receives twice his or her usual wage as compensation. To illustrate the case, an employee with $20/hour would now have to earn $40/hour for overtime work if double-time was on.
Double time is a rare kind of overtime than traditional one. It is usually used in special cases, which are presented in formalized arrangements called employment contracts or union agreements.
An employment contract contains the agreement details between the employer and the employee, such as the conditions and terms of the employment relationship— salary, working hours, and benefits. A company may decide to pay employees with double time (and also overtime pay) and specify this in their employment contracts. Whereas union agreements, just like employment contracts, which state fair working conditions, salary, benefits, and other perks, may also have specific double-time (and/or overtime) requirements in them.
Did You Know
“California is the singular state that stipulates “daily double time” pay through law. In California, employers must pay the “daily double time” to staff who work for more than 12 hours per day.”
How Do Companies Offer Double Time?
Companies mostly announce double time for holiday work and extremely long working hours. For instance, an employee who has taken up a shift on Christmas Day might be given double-time pay for sacrificing a holiday to go to work.
For sectors with safety hazards (e.g. healthcare or construction), unions frequently negotiate for double-time pay as a means to ensure both worker safety and the well-being of workers.
In these industries, stress is quite common due to physical effort, which could be the cause of accidents. Unions, by calling for double-time pay, motivate employers to establish more reasonable working hours and proper rest for employees as a priority.
Differences Between Double Time and Overtime
Although double time and overtime might sound similar. However, you must be aware of what the differences are so that you can accurately compensate each of your workers.
1. Pay Rate
The most major disparity between regular and double-time overtime is the pay scale. An extra payment is high at 1.5 times the employee’s regular wage since overtime is usually 1.5 times an employee’s regular rate of pay, whereas a double time is the employee’s regular hourly rate paid twice.
2. Applicability
Overtime and double time do not just mean the same thing, but they rather fit into different situations.
When employees complete more than 40 hours within a week, they get their overtime pay, or, in some of the states, they get their pay for their overtime when they work for more than 8 hours in a day. Workers in most of the industries usually receive overtime when they work more than the normal number of hours.
On the contrary, double time is expressed when workers exceed the regular overtime hours. For example, an employee who works on Thanksgiving might receive double time.
Besides California’s law, which says that an employer has to give double time pay to an employee if he/she does work over 12 hours, the state makes mandatory that an employer has to pay double time if an employee works more than 8 hours per day for seven consecutive days in a week.
Here is a tabular representation of the double time vs overtime to sum up all the findings regarding the two:
| Criteria | Double Time | Overtime |
| Definition | Double time refers to the pay rate of twice the employee’s standard hourly wage for specific hours worked beyond their regular schedule. | Overtime refers to the pay rate, usually 1.5 times the employee’s standard hourly wage, for hours worked beyond the normal full-time schedule. |
| Pay Rate | 2x the regular hourly rate. | 1.5x the regular hourly rate. |
| When It’s Applied | Applied after a certain number of overtime hours, on specific days like holidays, or after working a certain number of consecutive days. | Typically applied after 40 hours in a workweek or 8 hours in a workday (varies by country/state). |
| Common Usage | Often used in situations requiring extensive overtime, such as emergencies or mandatory holiday work. | Common in many industries for hours worked beyond the standard workday or workweek. |
| Legislation | Less common and often specified in union contracts or specific labour laws. | Regulated by labour laws such as the Fair Labor Standards Act (FLSA) in the United States. |
| Example | An employee earning $20 per hour would receive $40 per hour for double time. | An employee earning $20 per hour would receive $30 per hour for overtime. |
Final Thoughts
A thorough understanding of the differences between overtime vs double time is crucial for business owners and managers. Not being familiar with these can lead to a lower level of compliance with the labor law, consequently, the management may face legal troubles, fees, payroll pitfalls, and costly errors.
The application, calculation, and laws are not uniform for both of them. Overtime is mainly for hours over 40 in a workweek and is required federally. When applying double time, it is usually related to unique cases.