How to Calculate Overtime Pay
Overtime is one of the easiest things to get wrong on payroll — and one of the most expensive. Here's exactly how to calculate it, with a worked example.
The basic rule
Under the federal Fair Labor Standards Act (FLSA), non-exempt employees must be paid 1.5× their regular rate for every hour worked beyond 40 in a single workweek. That's where the term 'time and a half' comes from.
Overtime is calculated per workweek — a fixed, recurring 7-day period — not per pay period. Even on a bi-weekly payroll, you total each of the two workweeks separately.
Step by step
1) Total the hours the employee worked in the workweek. 2) Subtract 40 to find overtime hours. 3) Multiply overtime hours by 1.5× the regular rate. 4) Add that to the pay for the first 40 hours.
Worked example: at $20/hour with 46 hours worked — regular pay is 40 × $20 = $800; overtime is 6 × ($20 × 1.5 = $30) = $180; total gross = $980.
Watch-outs
The 'regular rate' includes most non-discretionary bonuses and shift differentials, not just the base hourly wage — so the overtime rate can be higher than 1.5× the base. Some states (California, Alaska, Colorado, Nevada) also add daily overtime. And exempt employees aren't owed overtime at all — but misclassifying someone as exempt is a common, costly mistake.
FAQ
Is overtime calculated weekly or by pay period?
Weekly. You total each fixed 7-day workweek separately, even on a bi-weekly or semi-monthly payroll.
What is the overtime rate?
At least 1.5× the employee's regular rate for hours over 40 in a workweek, plus any state daily-overtime rules.
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