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Uncompensated Overtime Calculator

Compute the indirect-rate dilution and dollar exposure when a salaried-exempt federal-contract employee works hours above the standard week without recording them against a cost objective. DCAA CAM 5-907 Total Time Accounting math.

Inputs

Result

Stipulated hourly rate
$50.00
Salary divided by base (40) hours.
Effective hourly rate
$40.00
Salary divided by hours actually worked.
Unrecorded hours / week
10.00
Hours worked above the base.
Unrecorded hours / year
520.00
Across the full work-year.
Indirect rate dilution
20.0%
Effective hourly rate vs. stipulated. Higher means more diluted indirect base.
Implicit unrecorded labor (annual)
$26,000.00
Stipulated rate × unrecorded hours × weeks. The dollar value DCAA looks for.

Educational tool. Total Time Accounting (DCAA CAM 5-907) requires charging all hours worked to a cost objective, not just the ones inside the standard week. The proper compliance path is the timekeeping system itself, not the math.

What this calculator computes

For a salaried-exempt employee, the stipulated hourly rate is the weekly salary divided by the standard base hours (usually 40). When the employee actually works 50 hours, the effective hourly rate is the weekly salary divided by 50. Both rates are real. The salary is fixed; what changed is how many hours of labor it bought.

Federal cost accounting treats hours as a resource that has to be charged to a cost objective, regardless of whether the employee is paid by the hour or by salary. DCAA Contract Audit Manual section 5-907 ("Time and Attendance") sets the Total Time Accounting expectation: every hour worked must be recorded against a contract, an indirect pool, or paid leave. There is no "off the books" bucket for the extra 10 hours.

When the extra hours go unrecorded, the direct-labor base on the timecard is artificially low. Indirect costs are still allocated against that base, so the indirect rate looks artificially high. On a cost-reimbursable contract, the contractor bills more indirect dollars per direct-labor hour than the actual cost structure justifies. On a fixed-price contract priced from those rates, the difference is a defective-pricing question.

The calculator surfaces three numbers: the rate dilution (how far the effective rate has drifted from the stipulated rate), the unrecorded hours (the operational gap), and the implicit labor cost (the dollars being absorbed off the timecard). These numbers do not, by themselves, fix anything. They size the timekeeping problem so the contractor knows whether the issue is a few hours per pay period or a materially distorted rate structure.

Compliance methods

DCAA CAM 5-907.2 recognizes two methods for handling salaried-exempt time:

  1. 1. Total Time Accounting (preferred)

    Record all hours worked against cost objectives. The salary is allocated to the recorded hours pro rata. If a salaried employee works 50 hours and 30 are direct on Contract A and 20 are indirect, the weekly salary is split 60/40. This is the cleanest method and the one DCAA expects on cost-reimbursable work.

  2. 2. Salary-Cost Method (effective-rate)

    Record only the standard hours, but compute an effective hourly rate at period close based on actual hours worked, and allocate the difference to indirect or as a downward adjustment to direct cost. Documented methodology and consistent application are required. This method is acceptable but more fragile under audit.

Frequently asked

What is uncompensated overtime?
Uncompensated overtime is hours worked by a salaried-exempt employee above the standard work week that are not separately recorded against a contract or indirect cost objective. The salary is fixed; the hours that produced it are not. DCAA Contract Audit Manual 5-907 calls this Total Time Accounting and requires that every hour worked be charged to a cost objective, recorded or not.
Why does uncompensated overtime matter for federal contractors?
It distorts indirect rates. The salaried hours that produced the work are real, but the timecard only shows the standard 40. The result is an overstated direct labor base relative to the indirect costs allocated to it, which inflates billing on cost-reimbursable contracts and creates a defective-pricing exposure on fixed-price work that used the rates as a basis for negotiation.
What does DCAA expect for compliance?
Either record all hours worked against cost objectives (Total Time Accounting), or apply a recognized adjustment method (effective-rate or salary-cost methods per DCAA CAM 5-907.2) to reallocate cost based on actual hours. The first approach is cleaner; the second requires documented methodology and consistent application.
Does Fair Labor Standards Act (FLSA) overtime exemption matter?
For pay purposes, yes. For cost-accounting purposes, no. Even if an employee is FLSA-exempt and not entitled to time-and-a-half pay, every hour worked must still be charged to a cost objective for federal cost accounting. The two regimes are separate.
How does this calculator help?
It surfaces the rate dilution and the implicit labor cost being absorbed off the books. The number is the size of the timekeeping problem, not a billing target. The compliance fix is the timekeeping system, not adjusting the rates downstream.

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