Overview
The One Big Beautiful Bill Act (OBBBA) includes new provisions around reporting Federal Overtime (Federal OT) wages.
*Note* Federal Overtime (Federal OT) represents any hours worked over 40 in a work week. Unlike regular overtime, Federal OT looks at all hours worked across every eligible timecard for an employee during the week.
For example, let's say an employee has a timecard with the following hours:
- Regular Hours: 40
- Overtime Hours: 2
- Double Time Hours: 3
Based on this timecard, with the total number of hours being 45, the Federal OT amount would be 5 hours, as it is the number of hours worked over 40 in that work week.
The OBBBA introduces a federal tax deduction for eligible employees on the premium portion of qualifying overtime pay (the "half" in time-and-a-half). This amount must meet FLSA requirements and be reported on the W-2. Unlike existing overtime fields, which capture what clients pay, this new calculation identifies specifically what portion of that pay qualifies for the federal deduction.
TempWorks has developed the following tools to support this requirement:
- Federal Overtime Utility: Calculates FLSA-eligible overtime for historical timecards from 1/1/2026 through 7/10/2026.
- OBBBA Log Utility Report: A report that displays the timecard updates applied by the Federal Overtime Utility, showing original versus new values and timecards that were excluded from the updates.
- Federal Overtime Automation: Automatically calculates FLSA-eligible overtime on qualifying timecards during time entry.
- OBBBA Weekly Report: Shows timecards that may require manual review based on defined edge cases, such as employees with multiple timecards in a week or with more federal overtime hours than what is on the timecard, and for known exclusions such as salaried, bi-weekly, and 1099 transactions.
- Data Integrity Check Updates: New OBBBA-related warnings have been added to the awareness section to help identify potential data issues.
*Note* Employers remain responsible for all final reporting and compliance decisions related to OT wage reporting. Overtime calculations vary based on pay structure, state rules, blended rates, and other edge cases. The accuracy of the results generated by these tools depends on the accuracy and completeness of the data provided.
Federal Overtime Utility
The Federal Overtime Utility calculates FLSA-eligible overtime for historical timecards from 1/1/2026 through 7/10/2026.
*Note* The Federal Overtime Utility should be run immediately, as it calculates Federal OT on closed week timecards from 1/1/2026 to 7/10/2026.
The utility will only need to be run for historical timecards. The Federal Overtime Automation will handle timecards moving forward.
Navigate to Enterprise > Pay/Bill > Action's Menu > Run Federal OT Utility:
Within the "Run Federal OT Utility", select the following:
*Note* It is recommended to run the Federal OT Utility in monthly increments.
Attempting to run the utility for more than one month at a time may result in the following error being received:
“The utility could not be completed because too many timecards were included in the request. Reduce the date range and try again”.
- Start Date: 1/1/2026, or appropriate Start Date
- End Date: Enter the appropriate End Date
- Update Timecards: Select the level in which you want the utility run for:
- Branch: Run the utility for a specific branch. Will then need to select the specific branch before continuing.
- Customer: Run the utility for a specific customer. Will then need to select the specific customer before continuing.
- Employee: Run the utility for a specific employee. Will then need to select the specific employee before continuing.
- Employer: Run the utility for a specific employer. Will then need to select the specific EINC before continuing.
- Tenant: Will update Federal OT for all timecards within your system.
*Note* The following timecards are excluded from the utility and will not be updated as a result:
- Bi-Weekly timecards
- Semi-monthly timecard
- Monthly timecards
- 1099 timecards
- Timecards that have had the override checked for FedOT
The above timecards will need to be manually audited, and the "FedOT" field may need to be updated.
Once the fields are populated based on your chosen criteria, select "Run":
With the historical timecards updated, you can open the OBBBA Log Utility report to view all of the updates and audit the changes.
OBBBA Log Utility Report
The OBBBA Log Utility report displays the timecard updates applied by the Federal Overtime Utility, showing original versus new values and timecards that were excluded from the updates.
This report is used to audit changes and to take note of any necessary manual adjustments that will need to be completed.
When running the report, you should ensure the parameter values match what was entered when running the utility:
- Start Date: 1/1/2026
- End Date: Enter the appropriate End Date
- Branch: Run the report for a specific branch.
- Customer ID: Run the report for a specific customer record.
- Employee ID: Run the report for a specific employee record.
- EINC: Run the report for a specific EINC or Employer.
- Tenant: Run the report for all timecards within your system.
After running the report based on the entered parameters, you will see groupings based on excluded and updated timecards.
Excluded Timecards
Excluded timecards met the criteria to be included in the utility, but were excluded from being updates due to one of the following reasons:
- "The order has bi-weekly, bi-monthly, or monthly pay periods"
- "The transaction is not a W2 transaction"
- 1099 timecards are excluded from the utility/report
- "The pay code used does not count as hours worked"
- Timecards with a non-billable Pay Code are excluded from the utility/report
- "The timecard does not have payable hours"
- Timecards with a Pay Rate of $0.00 are excluded from the utility/report
- "The federal overtime hours calculated are the same as the current federal overtime hours"
- "The federal overtime hours are overridden"
Updated Timecards
All timecards that were updated by the utility are displayed under the "The timecard was updated by the utility" section:
Federal Overtime Automation
The Federal Overtime Automation allows for the automating calculation of FLSA-eligible overtime on qualifying timecards during time entry.
*Note* The automation reviews the following information within the timecard(s) during the time entry process:
- Regular Hours
- Overtime Hours
- Double Time Hours
- Pay Code
- Pay Period
- Pay Rate
- Work Date (Not Automatically Populated)
- Transaction ID
Examples of Calculating Federal Overtime
The following are examples of automated Federal Overtime calculations based on the number of timecards for the respective employee.
Employee with One Weekly Timecard
In most situations, like an employee with one timecard for the week, the Federal OT mirrors the overtime and double time already recorded.
Weekly Timecard:
- 40 Regular Hours
- 2 Overtime Hours
- 4 Double Time Hours
- The result is 6 "FedOT" Hours
This is considered a 1:1 relationship between OT/DT and Federal OT.
Employee with Multiple Timecards in a Week
When an employee has multiple timecards, Federal OT is distributed using the following priority:
- Match existing OT/DT hours (1:1 ratio)
- Most recent Work Date
- Latest Timecard created
Example 1: Mirroring existing OT/DT hours
- Timecard 1
- 20 Regular Hours
- 3 Overtime Hours
- Federal OT = 3
- Timecard 2
- 20 Regular Hours
- 5 Overtime Hours
- Federal OT = 5
- Both timecards mirror their OT/DT hours.
Example 2: Most recent Work Date
*Note* The "Work Date" field is a manual entry field that can be utilized within Time Entry.
- Timecard 1
- 21 Regular Hours
- 0 Overtime Hours
- Work Date: June 29th
- Timecard 2
- 20 Regular Hours
- 5 Overtime Hours
- Work Date: Blank
- Totals
- Hours = 46
- Federal Overtime = 6
- One remaining Federal OT hour is assigned to the timecard with the most recent Work Date.
- Final Result:
- Timecard 1 = 1 Federal OT Hour
- Timecard 2 = 5 Federal OT Hours
- Timecard 1 = 1 Federal OT Hour
Example 3: Latest Timecard created
If no Work Date exists, the remaining Federal OT hours are assigned to the timecard with the latest Transaction ID.
- Timecard 1
- 21 Regular Hours
- 0 Overtime Hours
- Timecard 2
- 20 Regular Hours
- 5 Overtime Hours
- Final Result
- Timecard 1 = 0 Federal OT Hours
- Timecard 2 = 6 Federal OT Hours (Latest timecard gets the remaining hour)
- Timecard 1 = 0 Federal OT Hours
*Note* The following timecards are excluded from the automation and will not be updated as a result:
- 1099 employees
- Timecards with a Pay Rate of $0.00
- Timecards with a non-billable Pay Code
- Timecards with Pay Periods other than "Daily" or "Weekly"
The above timecards will need to be audited utilizing the OBBBA Weekly report, and the "FedOT" field may need to be updated.
At the end of the week, you can open the OBBBA Weekly report to view all of the updates and audit the changes.
Utilizing the Federal OT Override
The Federal OT Override allows you the ability to manually control the Federal OT value on a timecard.
The "Override Federal Overtime Hours" checkbox can be found via the "Detailed Timecard" in Time Entry:
When an override is entered:
- The overridden value is locked on that timecard.
- The automation treats that override value as fixed.
- The remaining Federal OT is redistributed across the employee's other eligible timecards.
Check Voids and Reversals
When a duplicate timecard is created to represent check voids and reversals, the "FedOT" should represent the negative value of the number of hours on the original timecard.
For example:
- Original timecard:
- 40 Regular Hours
- 2 Overtime Hours
- 2 Double Time Hours
- 4 "FedOT" Hours
- Duplicated timecard:
- -40 Regular Hours
- -2 Overtime Hours
- -2 Double Time Hours
- -4 "FedOT" Hours
Closed Week Timecards
With the "Edit Federal Hours on a Closed Timecard" permission, you will have the ability to edit the "Federal OT" checkbox and "Federal OT" field for a timecard on a closed week within Enterprise.
*Note* The "Edit Federal Hours on a Closed Timecard" permission is included within the default Payroll Administrator Security Role. If you do not have the Payroll Administrator Security Role, you will not be able to edit the "Federal OT" checkbox or field.
OBBBA Weekly Report
The OBBBA Weekly Report shows timecards that may require manual review based on defined edge cases, such as employees with multiple timecards in a week or with more federal overtime hours than what is on the timecard, and for known exclusions such as salaried, bi-weekly, and 1099 transactions.
Report Parameter Details
*Note* When running the report, the parameters are used to filter which employees to include in the report, not which timecards. All timecards for those employees with check dates during the entered range are then pulled into the report.
For example, if you enter "Company 123" into the customer name parameter, the report will first look for all employees who worked for that customer during the check date range. Once it has this list of employees, it then pulls ALL of their timecards, regardless of the customer.
The Start Check Date and End Check Date parameters are used to filter on the check date for each timecard. Timecards with check dates outside of the entered range will not pull into the report. While the timecards are filtered on check date, they are grouped on the weekend date of the timecard. This is so that time that was paid in a specified date range is included but can then be reviewed by the week it was worked in.
The Validation Types parameter lets you select which validation types to display in the results. The report will still check if the employee has any timecards during the entered date range that meet the criteria for other validation types. An "X" in the "Other Validations For This Employee During The Entered Date Range" section is used to indicate if the employee has timecards that meet the criteria for other validations. Only the validation types chosen in the drop down will be displayed as groups, but the chart on the right hand side will indicate if there are any other validations for each employee.
The report can also be run in detail mode by checking the "Detail" box parameter. In detail mode, the report expands all groups and displays other timecard data (weekend bill, pay period, pay code, customer, branch, etc).
*Note* Use shift+scroll to scroll horizontally across the report without having to scroll to the bottom to see the horizontal scroll bar.
Understanding Validation Types
The groupings in this report are related to the validation types and categories. If a timecard fits the criteria for multiple validations, it will pull into all applicable validation groups. For example, if a timecard is both bi-weekly (#1) and there are multiple timecards for the weekend date (#9), it will pull under both validation groups (#1 and #9).
Within each validation group, there is a group for each employee and weekend date. This group contain their total:
- RHours: Regular Hours
- OHours: Overtime Hours
- DHours: Double Time Hours
- THours: Total Hours
It also includes the:
- Total "Actual Federal Overtime Hours" (pulls directly from the "Federal Overtime Hours" field on the timecard)
- "Possible Federal Overtime Hours" (determined using a calculation similar to the utility and automation)
- Number of timecards the employee had for that weekend date
Within each employee/weekend date group, there is a row for each timecard which includes data for multiple fields on the timecard. The first "TxnID" column in these rows will be highlighted in light red if that specific timecard meets the criteria for one of the validations. Because all timecards for the employee and weekend date pull into the report, this highlighting clarifies which timecard(s) meets the validation criteria.
Excluded Timecards
These validations are more critical because the automation and utility update all timecards (except bi-weekly, bi-monthly, and monthly timecards) that are not overridden, but the default calculation may not work for timecards that fall into this category, so they may need additional review.
#1 - Has Bi-Weekly, Bi-Monthly, or Monthly timecards
Timecards are pulled into this validation group when the pay periods on the order has bi-weekly, bi-monthly, or monthly pay periods.
The automation and utility do not update federal overtime on timecards that aren’t either weekly or daily, so the purpose of this validation is to display those timecards for manual review and correction.
#2 - Has 1099 timecards
1099 employees are not typically eligible for overtime pay, and federal overtime on 1099 timecards is not updated in the automation or utility.
The purpose of this validation is to display 1099 timecard for manual review and correction.
Needs Review
These validations are less critical warnings, and are included so that timecards that meet certain criteria can be easily pulled forward for review.
#3 - Has salaried timecards with hours
Federal overtime hours on salaried timecards are not updated by the automation and utility.
The purpose of this validation is to display federal overtime hours on salaried timecards that have hours so they can be manually reviewed and corrected if needed.
#4 - Federal OT is greater than OHours and DHours on timecard
The federal overtime hours on the timecard are greater than the sum of the OHours and DHours on the timecard.
The purpose of this validation is to bring attention to timecards that may have too many federal overtime hours.
#5 - Federal OT is overridden on timecard
The timecard has the "Federal Overtime Hours Override" box checked.
The purpose of this validation is to pull forward timecards that have been overridden and have federal overtime hours that were manually corrected.
#6 - Federal OT on a timecard with a zero pay rate
There are federal overtime hours on the timecard, but it has as zero pay rate.
The purpose of this validation is to bring forward timecards that may be "Bill Only" transactions but that have federal overtime hours on them.
#7 - Negative Federal OT Hours
The timecard has a federal overtime hour value that is less than 0.
These may be voiding or correcting transactions, but the purpose of this validation is to display them for manual review.
#8 - Federal OT on timecard with paycode that indicates no hours worked
There are federal overtime hours on a timecard, but it’s pay code has the "CountAsHoursWorked" checkbox unchecked.
The department of labor website states that “there are a number of employment practices which the FLSA does not regulate” including “vacation, holiday, severance, or sick pay.” And that “Nonexempt workers must be paid overtime pay at a rate of not less than one and one-half times their regular rates of pay after 40 hours of work in a workweek.” (Handy Reference Guide to the Fair Labor Standards Act). Because of this distinction, the automation and utility do not update federal overtime hours on timecards that have pay codes that do not indicate that the hours were worked.
The purpose of this validation is to display timecards that have hours that were not worked, but have federal overtime hours.
#9 - Multiple timecards with hours for one weekend date
Timecards pull into this validation group when there are multiple timecards for the employee with the same weekend date.
The purpose of displaying these timecards is to make it easier to review daily timecards or simply multiple timecards where the worked hours for a week are split over multiple timecards. The automation and utility take all paid hours for the employee within the weekend date into account when calculating the federal overtime hours for the week, but this validation makes it easier to review them manually if needed.
*Note* For example, if one timecard has 30 hours and another has 20 for the same weekend date, individually they will not have overtime but based on the total hours worked for the week, the employee worked 10 hours of FLSA overtime.
No Validations
There is a "none" option in the "Validation Type" drop down parameter which is not selected by default. When selected, timecards with no validations are pulled into a separate section:
Data Integrity Check Updates
With the requirements presented by the OBBBA, additional Data Integrity Check warnings have been created.
Purple Errors
#90 - Please verify that the Federal OT Hours are correct.
- This message reminds to check Federal OT Hours. The table shows Employer name and the total amount of Federal OT Hours.
#91 - Federal OT Hours may need additional review.
- This message show specific timecards that have Federal OT hours that may not be displaying as intended.
#92 - Check if Overtime Factor is correct.
- This message shows assignments that have timecards that may contain an incorrect OT Factor.