Overtime

What Is Overtime?

Overtime is pay given to employees earning less than $35,568 annually when they work more than 40 hours in a workweek, meaning seven consecutive 24-hour periods.

Some states require employers to pay for overtime when employees work more than eight hours in a day or 24-hour period.

How Much Is Overtime Pay?

The Fair Labor Standards Act (FLSA) requires employers to pay an overtime rate of at least 1.5 times their regular daily or hourly rate (an additional 50% or time and a half). Some employers may choose to use a higher rate. For example, they might:

• Pay twice the regular hourly rate
• Set overtime hourly rates after only 36 hours of work

Overtime pay is paid on the employee’s regular payday for their regular pay period.

Who Is Exempt from Overtime Pay?

The US Department of Labor Wage and Hour Division classifies the following employees as exempt from overtime pay if they earn more than $35,568 per year on a salary basis:

• Executive employees
• Administrative employees
• Professional employees
  • Learned professionals
  • Creative professionals
• Computer employees
• Outside sales employees
• Highly compensated employees earning more than $107,432 per year
• Police, fire fighters, paramedics, and other first responders
• Independent contractors
• Volunteers (unless their employer is a nonprofit organization)
• Seasonal employees

What Is Considered Overtime?

A non-exempt employee must work over 40 hours in one workweek to qualify for overtime, along with a few other conditions:

• The workweek must be seven consecutive 24-hour periods.
• The workweek does not need to coincide with a specific calendar week.
• The workweek may begin on any day.
• The 24-hour periods may begin at any hour.
• Averaging the worked hours over more than one week is not permitted.

What Is Not Considered Overtime?

Overtime pay is not required for regular work hours performed on:

• Weekends (Saturdays and Sundays)
• Holidays
• Other regular days of rest (such as for religious purposes)

The only time overtime is given on these days is when it pushes an employee’s hours past 40 hours per week. Some employers may choose to pay a higher overtime rate when employees work extra hours on these days.

Is Mandatory Overtime Legal?

Mandatory overtime is legal by federal law if:

• The employee is paid at least 1.5 times their regular hourly rate for the overtime hours worked.
• The overtime doesn’t create a “safety risk” for employees.
• The employer is abiding by their state-specific overtime laws.

How Does Overtime Pay Work?

In the US, overtime pay works by compensating certain types of employees for working longer hours. For employers, that means first determining whether your employees qualify for overtime and then making sure you pay them accordingly.

Here are the steps to follow:

Step 1: Determine Whether Your Company Must Pay Overtime

Generally, you’re required to pay overtime if you meet all of the following conditions:

• You’re covered by the overtime rules in the FLSA.
• You have over $500,000 in annual sales.
• You work in “interstate commerce”—meaning your business is conducted across state lines, including phone calls, sending mail, or handling goods.

Your employees are entitled to overtime pay if they are:

• All non-exempt (non-salaried) employees
• Salaried employees earning less than $684 per week or $35,568 per year

Step 2: Calculate Time-and-a-Half Pay

As part of your payroll process, you'll need to review employee timesheets and adjust their pay to reflect any overtime they've earned. For more information, see “How Do I Calculate Overtime?” below.

Step 3: Maintain Accurate Records

As you run payroll, be sure to always include overtime pay on your employees’ paycheck. Keep records of all of your overtime payments to your employees to prove that you meet all FLSA requirements.

How Do I Calculate Overtime?

There are ways to calculate overtime pay for both non-exempt and exempt employees.

3 Steps to Calculate Overtime for Non-Exempt Employees

To calculate overtime for non-exempt employees:

1. Multiply the employee’s regular hourly pay rate by 1.5 (the time-and-a-half rate).
2. Multiply that total by the extra hours worked (over 40 hours). This will equal the amount of overtime pay the employee has earned.
3. Add the overtime total pay rate to the employee’s regular 40-hour workweek pay for their new total pay.

Example: Non-Exempt Employee Overtime

Ernie normally earns $15 an hour for a 40-hour workweek—totaling a $600 paycheck. Last week, Ernie worked an additional 5 hours—totaling a 45-hour workweek.

1. $15.00 an hour x 1.5 = $22.50 an hour overtime pay rate
2. $22.50 x 5 hours of overtime = $112.50 of total overtime pay
3. $600 regular pay + $112.50 overtime pay = $712.50 total workweek pay

2 Ways to Calculate Overtime for Exempt Employees

To calculate overtime pay for exempt employees:

• Option 1: Calculate the salaried employee’s hourly rate by dividing their yearly salary by 2,080 hours of work per year (based on fifty 40-hour workweeks and two 40-hour vacation weeks). Once you have this hourly rate, use the same overtime calculation for non-exempt employees (see above).
• Option 2: Calculate the salaried employee’s hourly rate by dividing their weekly salary by the number of normal hours worked per week. Once you have this hourly rate, use the same overtime calculation for non-exempt employees (see above).

Understanding how overtime works and how to calculate it ensures you’re following FLSA rules, plus it helps your employees trust your organization.

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