How Is Overtime Pay Calculated? Simple Explanation
Understand the federal overtime rule, how time-and-a-half is calculated in real dollar terms, when overtime kicks in, and how state rules may differ.
The Basic Overtime Rule
Under the federal Fair Labor Standards Act (FLSA), most non-exempt employees are entitled to overtime pay of at least one and a half times their regular rate for any hours worked beyond 40 in a workweek. This applies regardless of whether you are paid hourly or on a salary, as long as you are classified as non-exempt.
A workweek is defined as a fixed recurring period of 168 hours — seven consecutive 24-hour periods. It does not need to start on Monday. Your employer sets the workweek start day. Overtime is calculated based on hours in a single workweek, not averaged across multiple weeks. Working 50 hours one week and 30 the next does not cancel out — the 10 hours of overtime in week one are owed regardless of the lighter week that follows.
Exempt employees are not entitled to overtime. Exemptions generally apply to executives, administrative and professional employees, and certain highly compensated employees who meet specific salary and duties tests. Being a salaried employee does not automatically make you exempt.
Time and a Half in Plain Numbers
Time and a half means 1.5 times your regular rate of pay. If you earn $20 per hour, your overtime rate is $20 times 1.5, which equals $30 per hour. For every hour beyond 40 in a workweek, you receive $30 instead of $20.
For a week with 48 hours worked: the first 40 hours are paid at $20 each, totaling $800. The 8 overtime hours are paid at $30 each, totaling $240. Total weekly pay is $1,040. This is the correct calculation — some people mistakenly apply the overtime rate to all 48 hours, which overstates their pay.
The regular rate of pay is not always simply your hourly rate. If your compensation includes non-discretionary bonuses (bonuses promised in advance based on production or attendance), commissions, or shift differentials, those amounts typically must be included in the regular rate calculation before applying the 1.5 multiplier. This can make your effective overtime rate higher than 1.5 times your base hourly rate.
When Overtime Kicks In
Federal law requires overtime only after 40 hours in a workweek. This means the 41st hour in the week is your first overtime hour. Hours worked in excess of 8 per day but within the 40-hour weekly total are not overtime under federal law, though some states have daily overtime requirements.
Paid time off, holidays, and sick time do not typically count as hours worked for overtime purposes. If you work 38 hours and use 8 hours of vacation, you have not worked 40 hours — you have worked 38. The vacation hours do not push you into overtime territory.
Employers cannot average hours across weeks to avoid overtime. If your employer tells you to work 50 hours this week and 30 hours next week and calls it 40 hours average, that is illegal under federal law. The 10 hours of overtime owed in week one are owed regardless of the following week.
State Overtime Rules That Are Different From Federal
Several states have overtime rules that are more generous than federal law. California requires overtime after 8 hours in a single day, not just after 40 hours in the week. This means a California employee who works four 10-hour days has worked 8 hours of overtime for the week, even though the weekly total is only 40 hours.
California also requires double time — 2 times the regular rate — for hours worked beyond 12 in a single day and for the first 8 hours on the seventh consecutive day of the workweek. A few other states have daily overtime thresholds as well, though California's rules are the most expansive.
When state and federal overtime rules conflict, employees receive the benefit of whichever rule is more favorable to them. Federal law establishes a floor, not a ceiling. Employers operating in states with stricter overtime rules must comply with the state standard even though it exceeds federal requirements.