How to Calculate Overtime Pay: A Complete Guide
Published: March 19, 2024 | Reading Time: 8 minutes
Understanding how to calculate overtime pay is essential for both employees and employers. This guide will help you understand overtime rules, rates, and calculations to ensure you're being paid correctly for extra hours worked.
What is Overtime Pay?
Overtime pay is additional compensation for hours worked beyond the standard 40-hour workweek. In the United States, the Fair Labor Standards Act (FLSA) requires employers to pay eligible employees at least 1.5 times their regular rate for overtime hours.
Basic Overtime Rules
Standard Overtime Rate
1.5 times your regular hourly rate for hours worked beyond 40 in a workweek.
Common Overtime Rules
- Overtime is calculated weekly, not daily
- Holiday and weekend work don't automatically qualify for overtime
- Some employees are exempt from overtime pay
- State laws may provide additional overtime rights
How to Calculate Overtime Pay
Step 1: Determine Regular Rate
Calculate your regular hourly rate:
- For hourly employees: Your hourly wage
- For salaried employees: Annual salary ÷ (52 weeks × 40 hours)
Step 2: Calculate Overtime Rate
Multiply your regular rate by 1.5
Example: $20/hour × 1.5 = $30/hour overtime rate
Step 3: Calculate Overtime Hours
Count hours worked beyond 40 in a workweek
Example: 45 hours worked = 5 overtime hours
Step 4: Calculate Total Overtime Pay
Multiply overtime hours by overtime rate
Example: 5 hours × $30 = $150 overtime pay
Special Cases
Multiple Pay Rates
If you work different jobs at different rates:
- Calculate weighted average of all rates
- Multiply by 1.5 for overtime rate
- Apply to overtime hours
Bonuses and Commissions
These may need to be included in overtime calculations:
- Add to regular pay
- Recalculate regular rate
- Apply new rate to overtime
Common Mistakes to Avoid
- Calculating overtime daily instead of weekly
- Not including all forms of compensation
- Forgetting to account for different pay rates
- Miscounting overtime hours
State-Specific Rules
Some states have additional overtime rules:
- Daily overtime requirements
- Higher overtime rates
- Different workweek definitions
- Additional exemptions
Using Our Calculator
Use our Yearly Wage Calculator to understand how overtime affects your annual income and to verify your overtime calculations.
Conclusion
Understanding overtime calculations is crucial for ensuring fair compensation. By following these guidelines and using our calculator, you can verify your overtime pay and maximize your earnings.