How to calculate overtime pay: formula and examples

Published Monday 20 April 2026

Table of contents

• What is overtime pay?
• Overtime laws in the US
• How to calculate overtime pay
• FAQs on overtime pay

Key takeaways

• Apply the overtime formula — hourly rate × 1.5 × overtime hours worked — to any non-exempt employee who works more than 40 hours in a single work week, whether they are hourly, salaried, or part-time.
• Calculate an adjusted hourly rate that includes non-discretionary bonuses (such as performance-based awards) before applying the overtime formula, but exclude discretionary bonuses like holiday gifts or employee-of-the-month awards.
• Check your state's overtime rules, as some states — like California — require daily overtime and double-time pay that go beyond the federal 40-hour weekly threshold.
• Track all hours worked accurately and pay overtime for any hours over 40, even if the extra hours were not pre-approved, to avoid penalties including back wages and civil fines of up to $2,074 per violation.

Key takeaways

• Employers must pay overtime when non-exempt employees work more than 40 hours a week. You can define any seven-day period as a work week, but you must be consistent.
• Apply the overtime formula of hourly rate × 1.5 × overtime hours worked for any non-exempt employee who works more than 40 hours in a single work week, regardless of whether they are hourly, salaried, or part-time.
• Include non-discretionary bonuses when calculating overtime pay by determining an adjusted hourly rate that incorporates the bonus amount, but exclude discretionary bonuses like holiday gifts or employee-of-the-month awards.
• Maintain accurate time tracking to ensure compliance, as employers must pay overtime for all hours worked over 40 regardless of whether the overtime was pre-approved.

What is overtime pay?

Overtime pay is compensation at 1.5 times an employee's regular hourly rate for hours worked over 40 in a week. The Fair Labor Standards Act (FLSA) requires this time-and-a-half rate for all non-exempt employees.

Getting overtime right matters. A government report found that nearly 85 percent of FLSA violations were related to overtime, with total FLSA minimum wage and overtime cases generally ranging between 23,000–30,000 each year.

Understanding federal and state overtime regulations helps you stay compliant.

Overtime laws in the US

US overtime laws require employers to pay non-exempt employees 1.5 times their standard rate for hours worked over 40 per week. The Fair Labor Standards Act (FLSA) sets the federal baseline. New legislation allows employees to deduct up to $12,500 of qualified overtime compensation from their federal income taxes between 2025 and 2028. Some states have stricter rules.

Key requirements include:

• 40-hour threshold: Overtime applies after 40 hours in a single work week
• Flexible work week: You can define any seven-day period as your work week
• Consistency requirement: Once set, your work week must remain the same

Examples of a seven-day work week include Sunday at midnight to Saturday at 11:59 pm, or Monday at 8 am to the following Monday at 7:59 am.

The following sections explain who qualifies for overtime and which employees are exempt.

Who qualifies for overtime pay?

Not all employees are entitled to overtime pay under federal law.

Overtime eligibility depends on how employees are paid and classified:

• Hourly employees: Almost all hourly workers are entitled to overtime pay
• Non-exempt salaried employees: Must receive overtime when working over 40 hours per week
• Blue-collar salaried workers: Usually entitled to overtime pay
• White-collar salaried workers: Most are exempt from overtime requirements

Some employees are exempt from overtime requirements based on their salary and job duties.

Exemptions from overtime pay

Exemptions exist at both the federal and state levels.

Federal exemptions

The FLSA exempts salaried employees from overtime if they meet both criteria:

• Salary threshold: Earning at least $684 per week
• Job duties: Working in an executive, administrative, professional, or creative role

Additional exemptions apply to:

• Outside sales employees: No minimum salary requirement
• Skilled computer employees: Must earn at least $27.63 per hour or $684 per week

Check out the US Department of Labor's fact sheet on exempt employees.

Beyond federal exemptions, state laws may impose additional requirements.

State-specific rules

Some states have stricter overtime requirements than federal law. California, for example, requires:

• Daily overtime: Pay 1.5x for hours over eight in a single day
• Double time: Pay 2x for hours over 12 in a single day
• Seventh-day overtime: Pay 2x for hours over eight on the seventh consecutive workday

For your state's overtime rules, check with your state's department of labor and employment. Here's more information from Bloomberg Law on overtime rules by state.

Now that you understand who qualifies for overtime, here's how to calculate it.

How to calculate overtime pay

The overtime pay formula is: Hourly rate × 1.5 × overtime hours worked = overtime pay

Use this formula to calculate time-and-a-half pay for any non-exempt employee who works more than 40 hours in a single work week, keeping in mind that for tax year 2025, employers are not required to separately report qualified overtime compensation on Forms W-2.

This formula applies to three main employee types:

• Hourly employees: Apply the formula directly
• Salaried employees: Calculate hourly rate from salary first
• Bonus/commission employees: Calculate an adjusted hourly rate

How to calculate overtime pay for hourly-rate employees

Calculating overtime for hourly employees takes two steps.

Here's how to determine the extra pay owed:

1. Determine overtime hours: Subtract 40 from total hours worked
2. Apply the formula: Overtime hours × 1.5 × hourly rate

Here's an example of how this works in practice.

Example calculation

An employee earns $20 per hour and works 45 hours in a work week:

1. Overtime hours: 45 - 40 = 5 hours
2. Overtime pay: 5 × 1.5 × $20 = $150

How to calculate overtime pay for salaried employees

Salaried employees need an extra step: you must first convert their salary to an hourly rate before applying the overtime formula.

Formula: Annual salary ÷ 52 weeks ÷ 40 hours = hourly rate

Follow these steps to calculate overtime for salaried employees.

Step-by-step process:

1. Convert salary to hourly: Divide annual salary by 52 weeks, then by 40 hours
2. Calculate overtime hours: Count hours worked over 40 in the work week
3. Apply overtime rate: Multiply hourly rate × 1.5 × overtime hours

Here's how this calculation works in practice.

Example calculation

An employee earns $52,000 per year and works 50 hours in a work week:

1. Hourly rate: $52,000 ÷ 52 ÷ 40 = $25 per hour
2. Overtime hours: 50 - 40 = 10 hours
3. Overtime pay: 10 × 1.5 × $25 = $375

Calculating overtime becomes more complex when employees earn bonuses or commissions.

Overtime pay for bonus and commission-based employees

When employees earn bonuses or commissions, you may need to adjust their overtime rate. The key factor is whether the bonus is discretionary or non-discretionary.

The type of bonus determines whether you include it in overtime calculations.

Bonus types and overtime treatment:

• Non-discretionary bonuses: Include in overtime calculations. These are formula-based bonuses tied to quality, accuracy, or efficiency targets.
• Discretionary bonuses: Exclude from overtime calculations. These are unexpected awards like holiday bonuses or employee-of-the-month recognition.

Follow these steps to calculate overtime when non-discretionary bonuses apply:

1. Calculate adjusted hourly rate: (Total weekly earnings + bonus) ÷ total hours worked
2. Calculate the overtime premium: Overtime hours × adjusted hourly rate × 0.5
3. Add to total pay: Base pay + bonus + overtime premium

You may wonder about the 0.5 multiplier.

Why multiply by 0.5 instead of 1.5?

The base wage is already included in the adjusted hourly rate calculation. You only need to add the extra half-time premium for overtime hours.

Here's how this calculation works in practice.

Example calculation

An employee earns $20 per hour, works 50 hours, and receives a $100 performance bonus:

1. Adjusted hourly rate: ($20 × 50 + $100) ÷ 50 = $22
2. Overtime premium: 10 hours × $22 × 0.5 = $110
3. Total compensation: $1,000 base pay + $100 bonus + $110 overtime premium = $1,210

FAQs on overtime pay

Here are answers to common questions about calculating overtime.

Do part-time employees qualify for overtime?

Yes, part-time employees qualify for overtime pay if they work more than 40 hours in a work week. The FLSA doesn't distinguish between full-time and part-time status when determining overtime eligibility.

Can employers require employees to work overtime?

Yes, employers can generally require employees to work overtime as long as they pay the proper overtime rate. However, some employment contracts or union agreements may limit mandatory overtime.

What happens if an employer doesn't pay overtime?

Employers who fail to pay overtime may face penalties including back wages, liquidated damages equal to the unpaid amount, and civil penalties up to $2,074 per violation. Employees can file complaints with the Department of Labor or pursue legal action.

Does overtime apply to remote workers?

Yes, overtime laws apply to remote workers the same way they apply to in-office employees. Employers must track hours worked and pay overtime for any hours over 40 in a work week, regardless of where the employee works.