How to avoid overtime calculation errors: 5 key points that cannot be ignored

In recent years, the "overtime calculation" issue faced by workers and companies has repeatedly become a social focus, and the number of related disputes has continued to rise. The Ministry of Labor has pointed out from time to time that many disputes are caused by the misunderstanding and negligence of employers or human resources departments about the overtime pay calculation rules, which leads to companies accidentally violating the law and employees' rights being damaged. Faced with an increasingly stringent labor inspection environment, the correct calculation of overtime has become an important issue that both labor and management cannot avoid. The following article will use the form of news investigation reports to reveal common errors in overtime pay calculation and key points for prevention, helping companies and workers to jointly establish a legal and complete overtime system.

Ministry of Labor: Miscalculation of overtime pay will be subject to heavy penalties

The Ministry of Labor reiterated several times in 2023 that if overtime calculation does not comply with legal provisions, employers will be fined between NT$20,000 and NT$1 million in accordance with the law. The following table shows the statistics of penalties for overtime pay violations in various counties and cities in 2023:

Source: Ministry of Labor’s 2023 Violation Punishment Bulletin

The Ministry of Labor reminds that employers and employees must understand the correct rules for calculating overtime to avoid future labor disputes and huge fines.

Expert analysis of the five major pitfalls of overtime calculation errors

1. Calculate overtime pay based only on “base salary” or “basic salary”

Ignoring the statutory definition of “wages”

According to current laws, the basis for overtime pay is "wages" rather than simply base salary or basic salary. Wages include: basic salary, full attendance bonus, allowances, performance bonuses and all other regular remuneration derived from work. For example, if an employee receives a full attendance bonus or night shift allowance, overtime pay should also be included. Experts point out that the most common mistake companies make is to use only base salary for calculations.

Reminder: All regular, fixed payments that are wages should be included in the overtime pay base.

2. Overtime is calculated based on the full hour. Partial hours will not be paid.

The law stipulates that it should be accurate to the minute

Many companies still follow the old practice of not counting overtime hours less than one hour. According to the Labor Standards Act, overtime pay must be calculated to the minute, and even if you only work overtime for 15 minutes, you must pay it proportionally. The Ministry of Labor specifically emphasizes that if paid at an hourly rate, 20 minutes of overtime should be paid at a ratio of 20/60 hours.

Violation case sharing:

A technology company in Taichung City continued to handle overtime by "only calculating every full hour" method. After being reported by employees and sent to the labor inspection, the company was fined NT$560,000. This case reflects that "accurate calculation" is a basic principle that all human resources must abide by.

3. Compensatory leave can only be decided by the employer unilaterally

Overtime compensatory leave requires "mutual consent" to be implemented

Many employees choose to take compensatory time off for working overtime, but mistakenly believe that employers can unilaterally designate compensatory time off and exempt them from overtime pay. According to current regulations,Compensatory leave must be agreed upon by both parties and requested by the employee., it can only replace overtime pay with the employer's consent. If the employee does not actively choose, the employer should still pay overtime wages.

Tips: The implementation of compensatory leave must have the personnel department record the employee’s consent in documents for future verification.

4. The overtime pay calculation ratio was wrong, 1.33 times and 1.66 times were misused

The correct ratio should be calculated by time period according to law

Common errors in calculating overtime pay also include misusing 1.33 or 1.66 times the calculation multiple. According to Article 24 of the Labor Standards Act:

• Extended working day:
• 1/3 of the hourly wage (i.e. 1.33 times) will be paid for the first 2 hours
• If the hours exceed 2 hours, 2/3 of the hourly wage (i.e. 1.66 times) will be paid.

However, in practice, the third decimal place should not be discarded directly. The hourly wage should be accurate to the second decimal place to avoid missing payments.

Reminder: Do not carry or discard numbers when calculating; calculate to the correct number of digits according to the law.

5. Ignoring “rest days” or overtime pay rates based on daily wages

Overtime pay on rest days must be paid in accordance with the law, regardless of the form of salary

Many employers think that "daily wages or hourly wages"It is a serious mistake to no longer pay overtime pay to employees who work on their rest days. The Labor Standards Act stipulates that regardless of the form of salary, overtime pay at a corresponding multiple must be paid for overtime work on rest days. Violators will be prosecuted according to law!

News scene case: A retail business in New Taipei City mistakenly used hourly wages as an excuse to not pay overtime pay on rest days and was reported by the labor inspector and fined NT$280,000.

Key tips for establishing a correct overtime calculation process

1. Planning working hours and overtime management system

• Clearly define the overtime application and review process and implement working hours records.
• It is recommended to use digital timekeeping management to ensure that records are not missed and are easy to check.

2. Education and training to strengthen legal awareness

• We regularly hold overtime calculation and labor standards law education and training for supervisors and human resources.
• Regularly review company policies and proactively revise calculation methods that require adjustment due to changes in regulations.

3. Make good use of the "overtime pay calculation tool"

The Ministry of Labor has established an "overtime pay calculation system", and companies can also build their own calculation modules. The following table compares the main overtime calculation resource functions:

Reminder: The human resources department should regularly check overtime records and salary payments to avoid omissions or miscalculations.

Employee self-insurance and complaint channels

How can employees protect their own rights and interests?

• Confirm monthly attendance and overtime records, and proactively confirm overtime calculation details with HR.
• If you find any problems,You can submit your attendance certificate and salary details to the Labor Bureau to file a complaint, safeguard your rights according to law.

Conclusion of the news interview: Errors in overtime calculation have become a "high-risk" area in the modern workplace. Whether it is the company or the employees, as long as they understand the key points and set up institutional defenses, they can greatly reduce the risk of labor disputes. The government has called for stronger supervision and auditing in the future, and for companies and employees to "know and abide by the law" to allow labor-management relations to develop healthily.