How Overtime Pay Is Calculated: Regular Rate, Salary and Daily Rules

Overtime looks simple until the paycheck arrives and the number is not what you expected. The rule itself fits in one sentence, but the answer depends on what counts as your regular rate, which hours count, and whether your state adds rules of its own. This guide walks through each case with numbers.

The basic rule

Under the federal Fair Labor Standards Act (FLSA), covered employees who are not exempt must be paid at least one and a half times their regular rate for every hour over 40 in a workweek. A workweek is a fixed, repeating block of seven days. It does not have to start on Monday, but it cannot move around, and hours cannot be averaged across two weeks.

Example: 46 hours at $22 an hour. The first 40 hours pay $880. The six overtime hours pay $33 each, which is $198. The week pays $1,078.00.

Step 1: find your regular rate

For most hourly workers the regular rate is just the hourly wage. It changes when you are paid something extra for the work, because the law says overtime is based on all pay for the week, not only the base wage. Shift differentials and most bonuses that you were promised in advance count. Gifts, expense reimbursements and truly discretionary bonuses generally do not.

Example: 50 hours at $20, plus a $100 production bonus. Straight-time pay is $1,000 plus the $100 bonus, $1,100 in all. Divide by 50 hours and the regular rate is $22.00, not $20. The ten overtime hours earn an extra half of that rate each, $110.00 in total, so the week pays $1,210.00. Using $20 as the rate would short the worker by $10.

Step 2: count the hours that qualify

Only hours actually worked count toward the 40. Paid holidays, vacation and sick days are not hours worked under federal law, so a week with a paid holiday and 36 hours on the job has no overtime even though you were paid for 44. Time you are required to be working, including short breaks and required training, generally does count.

Daily overtime and double time

Federal law looks only at the week. A handful of states add daily rules, and California is the best known: overtime after a long day and double time beyond a higher daily limit. Where both daily and weekly rules apply, an hour is not paid as overtime twice.

Example with an eight-hour daily rule: five ten-hour days at $20. Each day has two overtime hours, so the week has 40 regular hours and 10 overtime hours, and pays $1,100.00. Under the federal rule alone the result happens to be the same, because 50 hours is also ten over 40. The two rules give different answers when hours are uneven, such as three twelve-hour days in a 36-hour week: no federal overtime, but daily overtime in a state that has it.

Salaried but not exempt

A salary does not cancel overtime. Unless your job meets the tests for an exemption, which depend on how much you are paid and what your duties are, overtime is still owed. The regular rate comes from dividing the salary by the hours it is meant to cover.

The Department of Labor's own example: a $405 weekly salary for a 45-hour workweek. The regular rate is $405 ÷ 45 = $9.00. The salary already pays straight time for all 45 hours, so the five overtime hours are owed an extra half-time, $4.50 each, or $22.50. The week pays $427.50.

If the salary covers 40 hours instead, the regular rate is the salary divided by 40 and each overtime hour is paid at one and a half times that rate.

Who is not covered

Exempt employees are not owed federal overtime. The common exemptions are for executive, administrative and professional roles that meet a salary threshold and a duties test, along with some sales and computer roles. A job title is not enough, and neither is being paid a salary. Some industries also have special rules. If you think you have been wrongly treated as exempt, the Department of Labor's Wage and Hour Division explains the tests and takes complaints.

Things that are not overtime

• Weekend, night and holiday premiums. Federal law does not require extra pay for these unless the hours take you past 40. Employers offer them by choice or contract.
• Comp time. Private employers generally cannot give time off later in place of overtime pay.
• An agreement to waive overtime. You cannot sign away the right to it.

Checking your pay stub

1. Add up the hours you worked in each workweek, not the pay period as a whole.
2. Work out your regular rate, including any differential or bonus for that week.
3. Multiply the hours over 40 by one and a half times that rate.
4. Compare with the stub. If it is lower, ask payroll which hours and rate they used.

The Overtime Calculator does these steps for weekly or daily rules, and the No Tax on Overtime Calculator shows what is left after tax.