How to Calculate Overtime Pay: Step-by-Step Guide

To calculate overtime pay under federal law, multiply the employee's regular rate of pay by 1.5, then pay that rate for every hour worked over 40 in a workweek. The catch is getting the "regular rate" right, because it often includes more than the base hourly wage.

I'm Dana Whitfield, and after years running wage-and-hour compliance, I can tell you most overtime mistakes aren't about the multiplier. They're about what gets fed into it. Let's walk through it the right way, step by step.

The basic overtime formula under the FLSA

The Fair Labor Standards Act requires that covered, non-exempt employees receive overtime at a rate not less than one and one-half times the regular rate for all hours worked over 40 in a workweek (29 CFR 778.107). There's no federal daily overtime rule. It's all measured per workweek, a fixed, recurring period of 168 hours.

Here's the clean version for an hourly worker:

1. Count total hours worked in the workweek.
2. Subtract 40 to find overtime hours.
3. Multiply the regular rate by 1.5 to get the overtime rate.
4. Pay 40 hours at the regular rate plus overtime hours at the overtime rate.

Example: An employee earning $20/hour works 46 hours. The overtime rate is $30 ($20 x 1.5). Pay is (40 x $20) + (6 x $30) = $800 + $180 = $980. If you want to skip the math, our free time card calculator handles the weekly totals for you.

What counts toward the regular rate of pay?

This is where employers slip up. The regular rate isn't just the hourly wage. It's calculated by dividing total remuneration for the workweek (minus a few statutory exclusions) by the total hours actually worked (29 CFR 778.109).

The big one people miss: nondiscretionary bonuses. Production bonuses, attendance bonuses, and promised incentive pay all have to be folded into the regular rate before you apply the multiplier (29 CFR 778.208). Only truly discretionary bonuses and gifts can be excluded.

• Include: hourly wages, salary, commissions, shift differentials, and nondiscretionary bonuses.
• Exclude: discretionary bonuses, gifts, paid time off not worked, and reimbursed expenses.

Worked example with a bonus: An employee earns $20/hour, works 45 hours, and gets a $100 attendance bonus.

Step	Calculation	Result
Straight-time pay	45 x $20	$900
Add bonus	$900 + $100	$1,000
Regular rate	$1,000 / 45 hours	$22.22
Overtime premium	5 hours x ($22.22 x 0.5)	$55.55
Total owed	$1,000 + $55.55	$1,055.55

Notice the premium is the extra 0.5x, because the straight-time portion (including the bonus) already covered all 45 hours at the regular rate.

How do you calculate a blended (weighted-average) overtime rate?

When an employee works at two or more pay rates in the same week, you can't just use the higher rate. The FLSA requires a weighted average: total earnings divided by total hours gives the regular rate for that week (29 CFR 778.115).

Example: An employee works 30 hours at $18 (front desk) and 15 hours at $24 (training), for 45 total hours.

1. Total straight-time pay: (30 x $18) + (15 x $24) = $540 + $360 = $900.
2. Regular rate: $900 / 45 = $20.00.
3. Overtime premium: 5 hours x ($20.00 x 0.5) = $50.
4. Total owed: $900 + $50 = $950.

Common mistakes that trigger back wages

Wage-and-hour errors are expensive and common. The U.S. Department of Labor's Wage and Hour Division recovers hundreds of millions in back wages for workers each year, with overtime violations a leading cause (DOL WHD enforcement data). Here's what I see most:

• Averaging across two weeks. Overtime is per workweek. You can't average 30 hours one week and 50 the next to dodge the 10 overtime hours.
• Leaving bonuses out. Forgetting nondiscretionary bonuses understates the regular rate and underpays overtime.
• Misclassifying employees. Calling someone "salaried" or "manager" doesn't make them exempt. The duties and salary tests do.
• Off-the-clock work. Pre-shift setup, post-shift cleanup, and answering texts all count as hours worked.

The cleanest defense is accurate time records. Keep in mind the federal minimum wage is still $7.25/hour (DOL), and the regular rate can never drop below it. Many states set higher minimums and stricter overtime rules, so check the overtime laws by state that apply to your team.

Make overtime calculations automatic

Doing this by hand for one employee is manageable. Doing it for a whole crew, with bonuses and blended rates, every single week, is where errors creep in. A reliable time clock that tracks hours to the workweek and flags overtime as it accrues removes most of the risk.

That's exactly why we built Kloqk's free time clock: accurate hours in, correct overtime out, with records you can actually defend if the DOL ever comes knocking. Get the regular rate right, apply the 1.5x, respect the workweek, and you'll calculate overtime pay correctly every time.

Frequently Asked Questions

What is the overtime rate under federal law?

Under the FLSA, overtime is at least 1.5 times an employee's regular rate of pay for every hour worked over 40 in a single workweek. There is no daily overtime requirement under federal law, though some states (like California) add one.

Do bonuses change how I calculate overtime?

Yes. Nondiscretionary bonuses (production, attendance, or promised incentive bonuses) must be added into the regular rate before you apply the 1.5x multiplier. Only truly discretionary bonuses and gifts can be left out.

How do I calculate overtime for an employee with two pay rates?

Use a blended (weighted-average) rate: add all straight-time earnings for the week, divide by total hours worked to get the regular rate, then pay an extra 0.5x that rate for each overtime hour.

Is overtime calculated per day or per week?

Federal overtime is calculated per workweek, not per day. A workweek is any fixed, recurring 168-hour (7-day) period. Hours over 40 in that week trigger overtime, even if no single day exceeds 8 hours.

Can salaried employees get overtime?

Yes. Being salaried does not automatically make an employee exempt. Non-exempt salaried workers earn overtime; you calculate their regular rate by dividing weekly salary by the hours it covers, then pay 1.5x for hours over 40.