Calculating Overtime Step by Step

KNOW FEDERAL OVERTIME LAWS The Fair Labor Standards Act (FLSA) stipulates that the hourly minimum wage for employees is $7.25. An employee’s overtime pay rate is based on their hourly wage, which frequently is the minimum wage
  The FLSA mandates that the overtime pay, also called “premium pay,” must be at least 1.5 times an employee’s regular rate of pay. Employers are prohibited from averaging hours over multiple weeks.
  The FLSA states that non-exempt, hourly employees receive one and one-half times their regular rate of pay for all hours worked in excess of 40 in each workweek. A workweek is defined as a fixed and regularly recurring period of 168 consecutive hours. It need not run from Monday to Sunday.
KNOW YOUR STATE MINIMUM WAGE States may have higher minimum wages than the federal minimum wage.  



Many states have augmented the FLSA with their own laws. These state laws mandate overtime pay in additional situations, such as in Alaska which also grants employees “premium pay” for working more than eight hours in a day.
  Some states also compute overtime by day.

If an employee worked over 8 hours per day, he or she would be entitled to overtime for all hours beyond the first eight each day, regardless of the number of hours worked in a week.


    This is in addition to addition overtime accrues for working over 40 hours in the week, additional overtime would accrue.
KNOW WHICH EMPLOYEES ARE ELIGIBLE FOR OVERTIME State and federal laws both exempt certain groups of employees from overtime pay requirements. This includes seasonal employees.
    Individuals working in executive, administrative, and professional positions are also exempt.
    The U.S. Department of Labor’s website has a list of employees exempt from federal overtime rules.
CALCULATING OVERTIME PAY Find your regular rate of pay. The employee’s regular rate of pay must not be less than the statutory minimum wage.
  The “regular rate” is an average found by dividing the employee’s total pay, or 100% of all the employee’s payments, including straight time for overtime, by 100% of the scheduled and unscheduled hours worked, or his or her total hours worked. An hourly wage worker’s regular rate of pay is the standard hourly rate of pay.
    For a salaried employee, convert the salary into an hourly rate of pay by dividing the weekly salary by 40.
  The overtime rate must be raised if other forms of pay (nondiscretionary bonuses and shift differentials) raise the employee’s regular rate. Forms of compensation that do not increase the regular rate include vacation pay, sick pay, holiday pay, entirely discretionary bonuses, and health and welfare benefits.
    Payments made to the individual but excluded from calculation of total remuneration include items such as recruitment and relocation bonuses, travel and per diem payments, clothing and uniform allowances, and cash incentive awards.
  Computing Total Hours Worked “Total hours worked” is defined as all hours in the employee’s basic work week. This includes the employee’s basic hours, any irregular and regular overtime hours (such as call-back overtime, actual hours of standby and administratively uncontrollable overtime),  and all hours of paid absence, including all paid leave, hours of compensatory time used, continuation of pay hours, credit hours used, and holidays when work is not performed.
  Calculate based on federal overtime law If an employee worked 44 hours in a workweek, and the state has a minimum wage of $9.00 an hour and follows the federal overtime rules, then the first 40 hours would equal $360, or 40 x $9.00. The extra four hours of overtime pay would be multiplied by the regular rate of $9.00 times 1.5 ($13.50) to equal $54.00 in overtime pay.
  Calculate based on state specific rules.  
  Calculate overtime pay in states with additional weekly overtime rules.  


Comp Time cannot offset overtime pay requirements.

Comp time is typically not allowed for non-exempt or hourly employees, even when requested.

Employers cannot put an employee’s hours in a different workweek, or the average of one or more workweeks, to keep from reaching the 40-hour threshold for paying overtime.

Some exceptions apply to government employees and certain healthcare workers.


Unauthorized overtime is still considered overtime

Ensure that the employee attendance policy details all overtime must be pre-approved by management.

Nonetheless, if an employee works overtime without approval, the employer must still him or her for the work performed.

An employee may be disciplined for unauthorized overtime, but the employer is prohibited from adjusting his or her time records or not paying the overtime.



Off-the-Clock Work is still considered work

Any non-exempt employee doing work for the employer must be compensated, regardless of whether the employer approved the number of hours worked.

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