Alabama Overtime Exemption effective 1/1/2024

Alabama (AL) overtime pay is exempt from state taxes for “hourly” employees who work more than 40 hours a week (not over 8 hours a day – only over 40 hours a week). There will not be a tax update to track the amount of Alabama Exempt Overtime.  

Before you begin:

• Keep a manual spreadsheet of the employee OT exempt hours and OT exempt pay amount in case it is needed for future reporting
• If you are using Payroll with the Job Cost module, Other pays entered on the time cards do not post to Job Cost as there are no task codes associated with other pays. These will need to be posted into Job Cost manually

Section 1: To setup Other Pay for Alabama SWT Exempt Overtime wages:

1. Go to PR, Utilities, Maintain Other Pays and create an other pay called ALOTEXPT.
   • Method: Variable, entered on time card
   • Category: Individual
   • Debit account: Consult with your CPA for suggestions
   • Taxable Status: Deselect SWT taxable and leave all other tax items selected 
     
     
   • Save the Other Pay
2. • Select Other pays…
   • In the ID field enter ALOTEXPT
   • Click Accept
   • Click OK
   • Click Saveo to PR, Employees, Maintain Employees, select each employee that may have exempt over time and add the other pay.

Section 2: To process payroll using the Other Pay for Alabama SWT Exempt Overtime wages: 

1. PR, Processing, Time Card Entry.
   • Add your time card using any regular pay, sick pay, vacation, regular overtime, deductions or other pays
   • To add exempt overtime, for earnings select the Other Pay: ALOTEXPT
   • Manually calculate the overtime hours worked x overtime rate to obtain the exempt OT total and enter this amount for gross pay
     Keep a manual spreadsheet of the employee OT exempt hours and OT exempt pay amount in case it is needed for future reporting
     • If you would like to track exempt overtime hours on the time card/check stub, in the Earnings drop down, select an unused Overtime option and enter the overtime hours and $0.00 for the Hourly rate
   • Save time card
2. Process pay checks.
   • PR, Processing, Automatic Payroll Calculation
   • PR, Processing, Print Payroll check
3. For all checks going forward that require OT Exempt pay you will use the new Other Pay that was created and manually track the hours and wages in a spreadsheet.

Important: If you are currently on 2021 SP17 or 2023 SP3 and have processed payroll using the Overtime Exempt (AL) earnings type, extra steps need to be taken to correct your tax reporting:   NOTE: If the original check was direct deposit, inactivate the direct deposit feature in Maintain Employees, Direct dep... before proceeding with the steps below: 

1. Void any checks that have had the OT Exempt hours on the check.
   • Select PR, Processing, Void Payroll Check by check
   • Select the option to restore time cards
     
     
   • Select the desired checks to void and use the check date for the void
   • Click Void
2. Edit the restored time card and add an entry for the ALOTEXPT other pay created above.
   • PR, Processing, Time Card Entry
   • Make note of the hours and pay of the Overtime Exempt (AL) entry. Keep a manual spreadsheet of the employee OT exempt hours and OT exempt pay amount in case it is needed for future reporting
   • For earnings select the Other Pay: ALOTEXPT
   • For the gross pay enter the total pay from the Overtime Exempt (AL) entry (See example below)
     
     
   • Select the Overtime Exempt (AL) entry and click Remove to remove the entry from the time card (See example below_)
     
     
   • Save time card
3. Process pay checks so that they match the previous pay check. This check is for tax reporting purposes only and is not to be redistributed to employees.  This check can printed to plain paper or to PDF.
   • PR, Processing, Automatic Payroll Calculation
   • PR, Processing, Print Payroll check using the same date and check number as previously printed 
   •  NOTE: If direct deposit was inactivated, be sure activate again in PR, Employees, Maintain Employees, Direct dep... 

Alabama OT Exempt Reporting:
When a report is needed for the SWT exempt overtime go to Payroll, Reports, Other Pay Reports, Period Activity, Other Pay Activity Summary by Employee ID.