Refer to the Important Considerations and Information sections of this article. 

Use the following options to track weekly overtime pay premiums for W-2 reporting. Using a fringe or pay allows these amounts to calculate, and makes them easily accessible to add to the 2026 W-2 form Box 12.  

The formula only uses Regular paid hours exceeding 40 in a week. Federal Overtime reporting doesn't consider Daily OT or DT hours.

This article is subject to change due to updates from the IRS and Fair Labor Standards Act (FLSA) for 2026 and later.

Contact your Tax Accountant or Consultant for assistance or questions.

This setup isn’t within the scope of support.

Important considerations

If you need to report qualified overtime premiums in Box 12 of the W-2 for W-2 year 2026. Use the steps below when you pay employees overtime based on the number of hours per day. 

Only report OT premiums when the hours worked per week for the Regular Pay ID are over 40.

These steps assume that only working hours have a pay type of Regular or Overtime.

Contact your Sage Consultant or Sage Expert Services for help if:

• You set up other pays such as Vacation, Holiday, or Sick as Regular pay.
• You don't run your pay periods on a Weekly basis.
• You use multiple overtime rates and need to adjust the formula.
• You have questions about the setup.

Information

See information from the US Department of Labor regarding Overtime Pay and Double time pay.

An employer who permits an employee to work overtime must typically pay the employee premium pay for the overtime work.

Employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked more than 40 in a workweek. This overtime pay is at least 1.5 times their regular rates of pay.

The FLSA doesn’t require overtime pay for Saturdays, Sundays, holidays, or regular days of rest, unless they worked overtime hours on such days.

The FLSA, with some exceptions, requires that employer's include bonus payments as part of an employee's regular rate of pay in computing overtime.

Extra pay for working weekends or nights is a matter of agreement between the employer and the employee or their representative. The FLSA doesn’t require extra pay for weekend or night work or double time pay.

Track overtime for W-2s

Set up a formula, fringe, or an accrual pay to track qualified overtime. You can add the fringe or pay amounts to the 2026 W-2 box 12.

Create a formula

Create a formula in Payroll to calculate the qualified overtime.

OT_PREM

MAX((Regular Pay [PR Check] / Regular Hours [PR Check]) * (Regular Hours [PR Check] + Overtime Hours [PR Check] - 40),0)*.5

Create a fringe or an accrual pay using the formula

Create a fringe to accrue the qualified overtime. This fringe will calculate automatically for all employees who receive qualified overtime pay.

1. Go to Setup, Fringes and enter a Fringe ID and Description.
2. Uncheck all the Dist To checkboxes.
3. Check the Automatic Employee Fringe checkbox.
4. For the Calc Method, select Formulas.
5. For the Formula, select OT_PREM.

Create an accrual pay using the formula. You’ll need to add this accrual pay to the employees who earn Overtime.

1. Go to Setup, Pays and enter a Pay ID and Description.
2. Select the Pay type of Accrual.
3. Uncheck all the Dist To checkboxes.
4. Select the Calc Method of Formula.
5. Select the formula OT_PREM.
6. Add this pay to your employees who receive Overtime. 
   1. Go to Setup, Employees, and select the Pays button.
   2. Add the accrual pay. Select the Automatic box.

One Big Beautiful Bill Act overtime and double time reporting