Overtime Pay Calculator

How overtime pay is calculated under the FLSA

Overtime pay in the United States is governed primarily by the Fair Labor Standards Act (FLSA), which requires that covered non-exempt employees receive at least one and one-half times their regular rate of pay for all hours worked beyond 40 in a single workweek. The workweek is defined as a fixed, regularly recurring period of 168 consecutive hours, which is seven consecutive 24-hour periods. The FLSA does not limit the total hours worked, but it does mandate the premium pay rate for hours exceeding the 40-hour threshold within that workweek.

The basic overtime calculation is straightforward: regular pay equals regular hours multiplied by the hourly rate. Overtime pay equals overtime hours multiplied by the hourly rate multiplied by the overtime multiplier. The standard FLSA multiplier is 1.5, meaning time-and-a-half. Total gross pay is the sum of regular pay and overtime pay. For an employee who earns $20 per hour, works 40 regular hours and 8 overtime hours at time-and-a-half, the calculation is: regular pay equals $800, overtime pay equals 8 times $20 times 1.5 equals $240, total gross pay equals $1,040. The overtime premium above the standard hourly cost for those 8 hours is $80, representing the half-time premium.

Some states have more generous overtime laws than the federal minimum. California, for example, requires overtime pay for hours worked beyond 8 in a single day, in addition to the standard weekly threshold. Alaska, Nevada, and several other states also have daily overtime requirements. When state law is more protective than federal law, the more protective standard applies. Employers operating in multiple states must ensure they apply the correct overtime rules in each state for each employee.

Regular rate of pay and non-cash compensation

The FLSA's overtime requirement is based on the regular rate of pay, which is not always the same as the base hourly rate. The regular rate includes all remuneration for employment paid to or on behalf of the employee, with certain statutory exclusions. This means that shift differentials, non-discretionary bonuses, commissions, and piece-rate pay must be factored into the regular rate calculation, which can be more complex than the simple hourly rate. A non-discretionary bonus paid for production or attendance during the pay period, for example, increases the regular rate and therefore increases the overtime premium that should have been paid.

Exempt vs non-exempt employees

The FLSA overtime requirement applies only to non-exempt employees. Exempt employees, generally those who meet specific salary and duties tests for executive, administrative, professional, computer, or outside sales roles, are not entitled to overtime pay regardless of hours worked. As of 2024, the salary threshold for exemption is $684 per week ($35,568 annually). Employees who earn below this threshold are automatically classified as non-exempt, regardless of their job duties. Misclassifying employees as exempt when they should be non-exempt is one of the most common and costly wage-and-hour compliance failures, resulting in back pay, penalties, and litigation risk.

Managing overtime costs in your business

Overtime pay significantly increases labour costs and should be managed deliberately. The premium cost of overtime beyond the standard 40 hours is 50 percent above regular labour cost, which quickly erodes project margins if not planned for. Proactive overtime management strategies include better workload forecasting, cross-training employees so coverage flexibility reduces peak overtime, scheduling optimisation to spread hours more evenly across the workweek, and clear policies around when overtime must be pre-approved. Tracking actual versus planned overtime hours regularly allows managers to identify patterns and adjust before costs spiral.