Overtime premium
Overtime premium is the additional rate above normal basic pay for overtime hours. The total overtime wage includes both basic pay and this premium. For costing, a general premium used to meet the overall production schedule is commonly production overhead, while a premium incurred solely for a particular rush job may be directly attributed to it. Apply the reason and conventions given rather than assuming the same treatment in every situation.
Worked example
Eight overtime hours at a normal $10 rate paid at time-and-a-half cost $120: $80 basic pay plus a $40 premium.
Common mistake
The premium is not the full overtime wage, and a premium percentage must be applied to the normal rate, not added twice.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
