How are overtime hours taken into account in the payroll calculation?
December 20, 2022 | 40,00 EUR | answered by Claudia Köhler
Dear tax advisor,
I have a question regarding payroll and the consideration of overtime. In our company, it is common for our employees to work overtime in order to complete projects on time. So far, we have manually recorded the overtime and granted the employees time off in lieu. Now I am wondering how this overtime should be correctly accounted for in the payroll.
Up to now, we have not paid the overtime as such, but only granted time off in lieu. However, I have concerns about whether this is legally correct and whether the overtime may need to be compensated after all. Additionally, I am wondering if overtime is treated differently for tax purposes than regular working hours and if there are any special regulations to consider.
I want to ensure that our company is handling overtime payments correctly and avoiding any legal issues. Therefore, my question to you is: How should overtime be correctly accounted for in the payroll and are there any specific regulations to consider? Are there possibly alternative ways to compensate overtime without facing tax consequences?
Thank you in advance for your help and advice.
Sincerely,
Ludwig Weber
Dear Mr. Weber,
Thank you for your question regarding payroll and the consideration of overtime in your company. Overtime is an important topic that includes both labor law and tax aspects. I will try to answer your questions as comprehensively as possible.
First and foremost, it is important to clarify that overtime must generally be compensated, unless something different has been agreed upon in the employment contract or a company agreement. This means that your employees are entitled to compensation for their overtime hours worked. The compensatory time off that you have granted so far is one way to compensate for overtime, but it must also be ensured that legal regulations are complied with.
In the payroll, overtime should be recorded and compensated accordingly. There are various options for this, such as payment of overtime in money or the granting of additional days off. The compensation for overtime is subject to the usual tax and social security regulations. This means that overtime is generally subject to tax and social security contributions and must be taken into account in the payroll.
However, there are also tax-free ways of compensating for overtime, such as in the form of benefits in kind or tax-free supplements. It is important to comply with legal requirements in order to avoid tax consequences. Therefore, it is advisable to clarify with a tax advisor or an employment law expert which forms of compensation for overtime are best suited for your company in each individual case.
In summary, it can be said that overtime must be compensated correctly and must be taken into account in the payroll. There are various ways to compensate for overtime, but the tax and social security regulations should be observed to avoid legal issues.
I hope my answer was helpful to you. If you have any further questions, I am at your disposal.
Best regards,
Claudia Köhler
