How to Calculate Overtime: A Step-by-Step Guide
The four steps to an overtime calculation, worked through with an example — plus the two mistakes that produce most underpayments.
How to calculate overtime is a question that comes up the moment someone clocks those extra hours. The calculation is not as complex as it looks. Here is how it works.
The importance of overtime
Working beyond the standard 40-hour workweek means entering the realm of overtime. For most employees, overtime is not just about more time — it is about extra pay. In the US, the Fair Labor Standards Act requires that overtime be compensated at one and a half times the regular rate for hours over 40 in a workweek. That single rule is why getting the calculation right matters.
Laying down the basics
At its core, overtime is time worked beyond a preset threshold within a workweek. In the US the benchmark is 40 hours.
The word "workweek" is doing real work in that sentence. The Department of Labor defines it in Fact Sheet #23 as a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. It does not have to be Monday to Sunday, but it does have to be fixed, and averaging two weeks together to avoid overtime is not permitted.
How to calculate overtime
Step 1: Identify the regular hourly rate.
Step 2: Multiply that rate by 1.5 to get the overtime rate.
Step 3: Count the overtime hours in the workweek.
Step 4: Multiply the overtime hours by the overtime rate.
An example
Say you earn $15 per hour and worked 50 hours this week.
Step 1: Your regular hourly rate is $15.
Step 2: $15 × 1.5 = $22.50, your overtime rate.
Step 3: You worked 50 hours, so you have 10 overtime hours (50 − 40).
Step 4: $22.50 × 10 = $225 in overtime pay for the week.
Variations in overtime rules
The 40-hour weekly threshold is the federal floor, not the whole picture. Several states add a daily threshold on top of it — California requires overtime after eight hours in a workday and double time after twelve — and where state law is more generous than federal law, state law applies. Familiarise yourself with local regulations before running payroll.
Diverse overtime scenarios
Part-time workers
A common question: if someone is scheduled for 25 hours and works 30, is that overtime? Under the FLSA, no — the threshold is 40 hours in the workweek, regardless of what was scheduled. Local regulations or an employment contract might say otherwise.
Overtime for salaried workers
Salaried workers add a twist. Some salaried roles are exempt from overtime; many are not. Being paid a salary does not by itself make someone exempt — the executive, administrative and professional exemptions each require a specific set of job duties as well as a salary above a threshold. For non-exempt salaried employees:
- First, convert the salary to an hourly regular rate.
- Then proceed with the four steps above.
Overtime caps
Some jurisdictions limit how many overtime hours may be worked in a day or week. Awareness of those particulars matters, especially in safety-sensitive industries.
Mistakes to avoid in overtime calculation
Double-counting the base hour
Do not add the regular rate and the overtime rate together for the extra hours. The overtime rate replaces the regular rate for hours beyond the threshold — a half-time premium on top of straight time, which is the same thing as 1.5×.
Overlooking additional earnings
This is the error that produces most back-pay claims. Non-discretionary bonuses, shift differentials and commissions all form part of the regular rate of pay on which overtime is computed. If someone earns a production bonus in a week they also worked overtime, the bonus has to be spread across the hours worked and the overtime recalculated on the higher regular rate. Paying overtime on the base hourly rate alone underpays them.
Frequently asked questions
What is the standard threshold for calculating overtime?
In the US it is 40 hours in a workweek. Hours beyond that are overtime. Some states add a daily threshold on top — California starts overtime after eight hours in a day.
Is the overtime rate always 1.5 times the regular rate?
One and a half times the regular rate is the federal standard. Some states and some contracts require double time in specific circumstances, such as hours beyond twelve in a day.
Are salaried employees entitled to overtime?
It depends on their duties, not just their pay method. Being salaried does not make an employee exempt — the exemption tests require specific executive, administrative or professional duties along with a salary above the threshold.
Do part-time workers receive overtime?
Yes, if they cross the threshold. Under the FLSA a part-time worker scheduled for 20 hours only earns overtime once they exceed 40 hours in the workweek.
How are bonuses and commissions factored into overtime calculations?
Non-discretionary bonuses and commissions are included in the regular rate. They are apportioned across the hours worked in the period they were earned, and overtime is then recalculated on that higher rate.
Is there a limit to how many overtime hours one can work?
The FLSA sets no cap for adult employees — it requires payment, not permission. Some states and some industries do set limits, particularly where fatigue is a safety issue.
Do holidays and weekends automatically qualify for overtime pay?
Not under federal law. The FLSA does not require overtime pay for work on Saturdays, Sundays or holidays as such — only for hours beyond 40 in the workweek. Employer policy or a contract may be more generous.
How do I determine if I'm exempt from overtime?
Exemption depends on job duties and salary level, not job title. Common exempt categories are executive, administrative, professional, computer and outside sales employees, each with its own test. Check the duties tests or ask HR.
Can an employer refuse to pay overtime?
No. If a non-exempt employee works overtime, the employer owes the overtime rate — even for hours that were not authorised. Employers can discipline employees for working unapproved overtime, but they still have to pay for it.
Are independent contractors entitled to overtime?
Genuine independent contractors are not covered by the FLSA overtime provisions. Classification matters here: misclassifying an employee as a contractor does not remove the obligation, and it is a common source of wage claims.