The short answer
Overtime pay under federal law is at least one and a half times the employee’s regular rate for every hour past 40 in a workweek. The regular rate is not always the hourly wage. It is everything paid for the work that week, minus a short list of exclusions, divided by the hours worked. For example, an employee paid $20 an hour with no extras who works 50 hours is owed $1,100 for the week.
The overtime pay calculation formula
Overtime pay is the regular rate multiplied by one and a half, for every hour past 40 in the workweek. That extra half is why people call it time and a half. Here is how to calculate overtime pay for any hourly employee, and every time and a half pay calculation follows the same three steps.
- 1
Find the regular rate
For a plain hourly job with no extras, the regular rate is the hourly wage. Add bonuses, differentials and commissions if there are any, then divide by the hours worked.
- 2
Count the hours past 40
Only hours inside the same workweek count. Each week stands on its own.
- 3
Pay those hours at one and a half times the rate
Add that to the pay for the first 40 hours, and you have the week.
Every example on this page uses the same employee. They earn $20 an hour, and this week they worked 50 hours.
For example, their first 40 hours pay $800. Their last 10 hours pay $30 each, which is $300. So the week comes to $1,100.
The right way
The common mistake
The mistake pays the last ten hours twice, once at $20 and again at $30. It happens when somebody adds overtime on top of a total that already counted those hours.
There is a second way to write the same formula, and you will need it later on. Pay every hour at the regular rate first. Then add half the rate for each hour past 40. That is $1,000 for 50 hours, plus $10 for each of the 10 extra hours. The total is exactly the same, and this is the version that keeps working once bonuses and second pay rates show up.
What is a workweek for overtime?
A workweek is a fixed, repeating block of 168 hours, which is seven 24-hour days in a row. You decide when it starts. It can begin on any day and at any hour, and it does not have to match the calendar week. Different groups of employees can even have different workweeks.
Once you pick it, it stays put. You can move the start, but only if the change is meant to be permanent. Moving it back and forth to avoid overtime is not allowed.
Each workweek stands alone. Federal law does not allow averaging hours over two or more weeks, even when both weeks are on the same paycheck.
For example, say the employee works 30 hours one week and 50 the next. On average that looks like two normal 40-hour weeks. Counted the right way, the second week has 10 hours of overtime in it.
Averaged into two 40-hour weeks, the pay is $1,600 and the overtime disappears.
Counted one week at a time, the second week carries its 10 overtime hours, and the two weeks pay $1,700.
In short
- •You choose when the workweek starts, and it stays fixed.
- •Every week is counted on its own.
- •A two-week pay period is still two separate workweeks.
Who is owed overtime: exempt and non-exempt employees
Most employees are owed overtime. The ones who are not are called exempt, and everyone else is non-exempt. For the common salaried exemptions, an employee has to pass three tests. If they fail any one of them, they are owed overtime.
1
Paid a salary
They get a fixed salary each week, not pay by the hour, and it is not cut because of how much or how well they worked.
2
Paid enough
Under the federal rule, that salary is at least $684 a week.
3
Doing an exempt job
Their real duties fit an executive, administrative, professional or computer employee exemption.
A salary alone does not make anybody exempt, and neither does a job title with the word manager in it. The Department of Labor says it plainly: job titles do not decide exempt status. The real work does.
For example, a shift supervisor on a salary of $800 a week clears the $684 line. That settles one test and nothing more. If their duties do not fit an exemption, they are still owed overtime, and the section on salaried non-exempt employees below shows how to work it out.
Outside sales and some other jobs have their own rules, and the law has more exemptions than these. If an employee fails any one of the three tests, every calculation on this page applies to them.
What goes into the regular rate of pay
The regular rate of pay is everything paid for the work in a week, minus the payments the law leaves out, divided by the hours worked that week.
Pay for the week ÷ Hours worked = Regular rate
The hourly wage is only where it starts. Money you pay because of the work usually goes in. Money that is a gift, a reimbursement or pay for time not worked usually stays out.
Goes into the rate
6 items- Hourly pay and salary
- Shift differentials, such as extra pay for nights
- Extra pay for hazardous or dirty work
- Bonuses people are promised or expect, such as attendance, production and safety bonuses
- Commissions
- Service charges added to a customer’s bill
Stays out of the rate
9 items- Gifts on holidays or special occasions, not tied to hours or output
- Paid vacation, holiday and sick time
- Reimbursed business expenses
- Occasional show-up or call-back pay
- Discretionary bonuses
- Bona fide profit-sharing plans
- Employer payments into retirement or health plans
- Overtime premiums, and true premiums for weekend or holiday work
- Perks like gym access, parking or tuition help
A bonus you promised in advance goes into the rate, whatever you call it. Everything in the right-hand column still gets paid. It just does not raise the rate that overtime is figured on.
How to calculate overtime with a bonus or shift differential
Add the bonus or differential to the week’s pay. Divide by the hours worked, and that is the regular rate. Then pay half of that rate again for every hour past 40.
Why only half? The week’s pay already covers every hour once at the straight rate, bonus included. The overtime hours are owed the extra half on top.
For example, say the employee earns a $100 attendance bonus in their 50-hour week.
- 1Wages for 50 hours50 × $20$1,000
- 2Add the bonus$1,000 + $100$1,100
- 3Find the regular rate$1,100 ÷ 50$22
- 4Extra half for 10 overtime hours$11 × 10$110
- 5The week$1,100 + $110$1,210
Working the extra half off the $20 wage instead pays $100 of premium and leaves $10 unpaid. The bonus lifted the rate to $22, so the overtime rises with it.
A shift differential works exactly the same way. Add it to the week’s pay before you divide. A commission paid for the week goes in the same way too.
Some bonuses cover more than one week, like a quarterly bonus. You can pay overtime on the normal pay first. When the bonus is paid, spread it back over the weeks it covers, and pay the extra overtime it adds to each of them.
A bonus only stays out of the rate if all three of these are true
An attendance, production or safety bonus that people know about fails this test, so it goes into the rate.
How to calculate overtime with two different pay rates
When one employee works two jobs at two rates in the same week, the regular rate is the weighted average. Add up the pay from both jobs. Then divide by all the hours they worked.
For example, say the 50 hours split down the middle. Half are spent on the register at $20, and half are spent as shift lead at $28.
$1,200 ÷ 50 hours
$24 rate
Extra half, 10 hours
$120
$1,200 + $120
$1,320
Paying the extra half at the $20 register rate gives $100 and leaves $20 unpaid. Worked off the blended $24 rate, the extra half is $120.
There is one other way, and it has a condition. If you and the employee agree before the work is done, the overtime hours can be paid at one and a half times the rate of whichever job they did during those hours. The agreement has to come first. Without it, use the weighted average.
How to calculate overtime for salaried non-exempt employees
Divide the weekly salary by the hours it is meant to pay for. That gives you the regular rate. Then pay time and a half on that rate for every hour past 40.
If the salary is set by the year, divide it by 52 to get a week. If it is set by the month, multiply by 12 first, then divide by 52. California publishes the same steps for turning a salary into an hourly rate.
For example, take a salary of $41,600 a year that is meant to cover 40 hours a week, in the same 50-hour week.
A year
$41,600
A week
$800
÷ 52
An hour
$20
÷ 40
10 overtime hours
$300
× $30
The week
$1,100
$800 + $300
The salaried week pays exactly what the hourly week pays, because the rate underneath is the same $20.
The fluctuating workweek, and why it is risky
There is a second method for salaried non-exempt employees, called the fluctuating workweek. It pays only half the rate for overtime hours, and the rate itself falls as the hours rise. So it has strict conditions, and it only applies when every one of these is true:
- The employee’s hours go up and down from week to week.
- The salary is fixed and does not change with the hours worked.
- The salary is high enough that the rate never falls below minimum wage.
- You and the employee clearly understand the salary covers every hour, however many there are.
- Every hour past 40 is paid at no less than half the regular rate for that week.
Using it on a salary that was meant to cover a 40-hour week pays far less overtime than is owed.
Tipped employee overtime calculation
When you take a tip credit, overtime is worked out from the full federal minimum wage of $7.25. It is not worked out from the $2.13 cash wage.
A tipped employee is someone who regularly gets more than $30 a month in tips. Under federal law you can pay them $2.13 an hour in cash and count up to $5.12 of their tips toward the $7.25 minimum. That $5.12 is the tip credit. You cannot count more tips toward an overtime hour than toward a regular one.
So the overtime rate is one and a half times $7.25, which is about $10.88. Take off the same $5.12 tip credit, and you pay about $5.76 in cash for each overtime hour.
| Hour | Cash you pay | How it is worked out |
|---|---|---|
| A regular hour | $2.13 | $7.25 minus the $5.12 tip credit |
| An overtime hour, done right | about $5.76 | $7.25 × 1.5, minus the same $5.12 |
| An overtime hour, the mistake | about $3.20 | $2.13 × 1.5 |
Working overtime off the $2.13 cash wage underpays every overtime hour by about $2.56. Worked off $7.25, the 10 overtime hours pay about $57.55 in cash, before tips.
One more thing catches people out. A service charge added to the bill, like a set 15 percent, is not a tip. It counts as pay, and it goes into the regular rate.
Which states have daily overtime and double time?
The federal rule only counts the week. Some states count the day as well, including California, Alaska and Nevada. California also adds double time.
California daily overtime and double time
California requires overtime after 8 hours in a day. For example, if an employee works a 10-hour day, the last 2 hours are overtime, even in a week that never reaches 40. Past 12 hours in a day, the pay is double time.
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California also has a rule for the seventh day in a row inside one workweek. The first 8 hours that day are paid at time and a half, and every hour past 8 is double time.
A week of four 10-hour days is exactly 40 hours, so the federal count finds no overtime at all. California counts each day and finds 8 hours of it.
Alaska
- •Overtime after 8 hours in a day, or after 40 in a week.
- •Paid at one and a half times the regular rate.
- •Employers with fewer than 4 employees are exempt.
Nevada
- •Everyone covered gets overtime after 40 hours in a week.
- •Daily overtime after 8 hours applies only to employees paid under one and a half times Nevada’s minimum wage.
- •An employee and employer can agree to four 10-hour days instead.
Sources: the California Division of Labor Standards Enforcement, the Alaska Department of Labor and Workforce Development, and Nevada Revised Statutes 608.018.
This guide explains the federal rule and what three states publish. It is not legal advice. State and local rules vary, and your state labor agency or an employment attorney is the authority for your business. The federal rules on this page come from the U.S. Department of Labor’s overtime fact sheet, regular rate fact sheet, bonus fact sheet, tipped employee fact sheet and exemption fact sheet, and from 29 CFR Part 778. The state rules come from the California Labor Commissioner, Alaska Department of Labor and Nevada Legislature.
How to stop overtime before the hours are worked
Every calculation above happens after the week is worked. By the time you are working out overtime, the premium is already owed. The only way to owe less of it is to schedule fewer hours past 40 in the first place.
You can do that with a spreadsheet. Keep a running total of each person’s scheduled hours for the week, and look at it before you add a shift. XShift AI’s Autopilot does that check for you, before the shift is saved. You tell it once, in a sentence:
What you type
“Never schedule anyone into overtime.”
What it does with every shift after that
- 1It adds up the hours that person is already scheduled for that week.
- 2It adds the hours of the shift being assigned.
- 3It compares the total with 40.
- 4If the total goes past 40, the assignment is refused.
When it builds a schedule for you, it skips that person and moves on to the next one who fits. When a manager assigns a shift by hand, the save stops and shows the hours before and after. You can set it to warn instead, so a manager who is allowed to override can still push a shift through. Book a demo and watch a shift get refused before it reaches 40 hours.
Frequently asked questions
How do I calculate overtime for someone paid $20 an hour who worked 50 hours?
Pay the first 40 hours at $20, which is $800. Pay the last 10 hours at time and a half, which is $30 an hour, or $300. The week comes to $1,100. That is the federal rule, and it assumes the $20 is their only pay that week. A bonus or a second pay rate would raise the regular rate, and the overtime with it.
Does a bonus count toward overtime pay?
Yes, if the employee was promised it or expects it. Attendance, production and safety bonuses all go into the regular rate. Add the bonus to the week’s pay, divide by the hours worked, and pay half of that rate again for every hour past 40. A bonus stays out only when you decide whether to pay it and how much at or near the end of the period, and nothing you said made people expect it.
What payments are excluded from the regular rate?
Gifts on holidays or special occasions that are not tied to hours or output. Paid vacation, holiday and sick time. Reimbursed business expenses. Occasional show-up or call-back pay. Discretionary bonuses. Bona fide profit-sharing plans. Employer contributions to retirement or health plans. Overtime premiums and true premiums for weekend or holiday work. Perks like gym access, parking or tuition help. All of these are still paid. They just do not raise the rate overtime is figured on.
How do you calculate overtime with two pay rates?
Use the weighted average. Add up the pay from both jobs for the week and divide by all the hours worked. That is the regular rate. Then pay half of it again for each hour past 40. For example, 25 hours at $20 and 25 hours at $28 is $1,200 for 50 hours, a $24 rate. The 10 overtime hours add $12 each, so the week is $1,320. The other method, paying overtime at the rate of the job done in those hours, is only allowed if you agreed it with the employee before the work.
Do salaried employees get overtime?
Some do. A salary alone does not make anyone exempt. For the common salaried exemptions, the employee has to be paid a fixed salary, the salary has to be at least $684 a week under the federal rule, and their actual duties have to fit an exemption. Job titles do not decide it. Fail any one of those and they are salaried non-exempt, which means overtime is owed: divide the weekly salary by the hours it is meant to cover, and pay time and a half on that rate past 40.
How is overtime calculated for tipped employees with a tip credit?
On the full federal minimum wage of $7.25, not on the $2.13 cash wage. Time and a half of $7.25 is about $10.88. You can take the same tip credit for an overtime hour as for a regular hour, at most $5.12, so you pay about $5.76 in cash for each overtime hour. Working it off $2.13 instead pays about $3.20 and underpays every overtime hour.
Which states require daily overtime?
California, Alaska and Nevada are three. California pays time and a half after 8 hours in a day and double time after 12. Alaska pays overtime after 8 hours in a day or 40 in a week, with an exemption for employers of fewer than four people. Nevada pays daily overtime after 8 hours only to employees earning less than one and a half times its minimum wage, unless they agreed to four 10-hour days. Check your own state labor agency, because rules vary.
Can I average hours over two weeks to avoid overtime?
No. Federal law does not allow averaging hours over two or more weeks. Each workweek is counted on its own, even when two weeks land on the same paycheck. An employee who works 30 hours one week and 50 the next is owed 10 hours of overtime for the second week.
Is a shift differential included in the regular rate?
Yes. Extra pay for working nights or other less popular shifts is pay for the work, so it goes into the regular rate. Add the differential to the week’s pay before you divide by the hours worked, and the overtime rate rises with it.
What software stops overtime before it happens?
XShift AI’s Autopilot stops overtime before a shift is saved. You write one sentence, such as “Never schedule anyone into overtime.” From then on it adds up the hours each person is already scheduled for that week, adds the hours of the shift being assigned, compares the total with 40, and refuses the assignment if it goes past. When it builds a schedule for you, it moves on to the next person who fits. When a manager assigns a shift by hand, the save is stopped and the hours before and after are shown. You can set it to warn instead, so a manager who is allowed to override can push the shift through.