How Overtime Pay Is Calculated

01

The familiar version

The basic estimate is base hourly rate multiplied by 1.5 for hours over 40 in a workweek. At $20 per hour, five overtime hours appear to produce $150 of overtime pay. This simple model is useful when the employee is covered, nonexempt, paid one rate, and receives no additional included compensation.

The workweek matters. Working 45 hours in one week and 35 in the next generally is not the same as 80 hours across a two-week pay period. Employers establish a fixed, recurring workweek, and hours are evaluated inside it.

02

Regular rate is the key phrase

Federal rules generally require overtime at one and one-half times the employee’s regular rate. The regular rate is built from compensation that must be included under the Fair Labor Standards Act. Certain bonuses, commissions, and differentials can affect it, while specific statutory exclusions may not.

An employee with several hourly rates may therefore have a weighted regular rate. The exact calculation can be more involved than choosing the highest or lowest rate. A pay calculator should disclose whether it uses the base rate or a broader regular-rate model.

03

Where estimates go wrong

Common errors include counting paid leave as hours worked, averaging two workweeks together, forgetting that a bonus affects the regular rate, or assuming every salaried employee is exempt. Job title and salary alone do not settle every exemption question.

State wage laws, union agreements, public-sector schedules, health-care 8-and-80 systems, and employer policies may be more protective or use specialized rules. If a difference is material, compare time records and earnings codes with official guidance or payroll.

ACTION PLAN

What to do next

1. Identify the employer’s defined workweek.
2. Separate hours actually worked from paid leave.
3. List bonuses and differentials paid for that week.
4. Check whether the employee is classified as exempt or nonexempt.

FAQ

Common questions