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:

  1. Calculate weighted average of all rates
  2. Multiply by 1.5 for overtime rate
  3. 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.