How Overtime Pay is Calculated

calculator with laptop
••• Copyright Chemistry/Photographer's Choice/Getty Images

Some employees are entitled to receive overtime pay when they work extra hours. Eligibility is based on weekly earnings and hours worked. Overtime pay is calculated based on a 40-hour workweek and overtime pay for eligible employees is required for any hours worked over those 40 hours. Overtime pay rules are governed by the Fair Labor Standards Act (FLSA) and, in some states, by state overtime regulations.

In states where an employee is subject to both state and federal overtime laws, overtime is paid according to the standard that will provide the higher amount of pay. Check your State Department of Labor website for information on overtime pay requirements in your location. Employers must follow both federal and state law to stay compliant.

What is Overtime Pay?

Workers currently earning less than $455 per week, which is $23,660 per year, are currently guaranteed federal overtime protection. There are exemptions for highly compensated employees who customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee.

According to the Department of Labor, employees covered by the Act must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

Double Time Pay

Double time is a rate of pay double the usual amount a person receives for normal hours worked. So, if your normal rate of pay was $11.00 an hour, double time pay would be $22.00 per hour. Double time is sometimes paid for working on federal holidays or when hours work exceeding the normal workday. 

When Double Time is Paid

There are no federal laws that require an employer to pay double time for overtime worked. The Fair Labor Standards Act (FLSA) has no requirement for double time pay.

However, state laws may provide for overtime or double time. For example, in California, double the employee's regular rate of pay must be paid for all hours worked in excess of 12 hours in any work day and for all hours worked in excess of eight on the seventh consecutive day of work in a work week. Check with your state Department of Labor for rules for your location.

Double time is most commonly an agreement between an employer and employee (or the employee's representative).  An agreement for double time may also be itemized in a labor agreement or union contract.

How Overtime Pay is Calculated

Overtime pay is not automatically awarded for work completed on Saturdays, Sundays, holidays, or regular days of rest unless hours worked on those days push the weekly total over 40 hours.

All non-exempt employees who work over 40 hours during a workweek must be paid at a rate of at least one and one-half times (typically referred to as time and a half) the employee's regular hourly rate. So a worker earning $10 per hour, who worked a 50-hour week would be entitled to 10 overtime hours at $15 per hour.  

Overtime pay applies to non-exempt salaried employees as well as hourly employees.  For example, a non-exempt salaried employee who is paid $600 per week would be guaranteed at least $22.50 per hour for each hour worked over 40 ($600/40 = 15 X 1.5 = $22.5 per overtime hour).

Under the Fair Labor Standards Act, an employee's workweek is a "fixed and regularly recurring period of 168 hours - seven consecutive 24-hour periods."  The workweek can start on any day or time as long as the hours are consistently calculated for that same period. Hours can't be averaged over a two or four-week pay period. The Act does permit employers to designate a different workweek for different classes of employees. 

Hospitals and residential care facilities are allowed to calculate overtime based on a period of 14 consecutive days instead of the otherwise required adherence to a seven consecutive day period. For example, a hospital employee might work 30 hours in week one of the period and 50 hours in week two of the period for a total of 80 hours. This worker would not be entitled to any overtime since she did not average more than 40 hours per week.

Non-exempt employees can be paid on a weekly, bi-weekly, semi-monthly, or monthly basis, and overtime is normally paid during the period that it was earned. 

Employees Not Entitled to Overtime

Some employees, known as exempt employees are not entitled to overtime pay.  To be classified as exempt, a worker must be earning over $455 per week. That amount may differ in locations where states laws regulate overtime pay. The rules under the Fair Labor Standards Act also have overtime exemptions for "highly compensated" employees who customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee.  

Many other categories of workers are exempt from overtime pay such as taxicab drivers, truck drivers, salespeople, radio and television station employees in small markets, motion picture theater employees, sugar processing workers, and seamen.

Proposed Changes to Overtime Pay Eligibility

The following changes to eligibility for overtime pay were scheduled to go into effect on December 1, 2016:

  • The salary for eligibility for overtime pay will increase from $455 per week to $913 per week or $47,476 per year.
  • The salary threshold for eligibility will be updated every three years, based on wage growth.

These proposed guidelines for overtime pay are being litigated in federal court:

August 31, 2017: U.S. District Court Judge Amos Mazzant granted summary judgment against the Department of Labor in consolidated cases challenging the Overtime Final Rule. The court held that the Final Rule's salary level exceeded the Department’s authority, and concluded that the Final Rule is invalid.

October 30, 2017: the Department of Justice, on behalf of the Department of Labor, filed a notice to appeal this decision to the U.S. Court of Appeals for the Fifth Circuit. Once this appeal is docketed, the Department of Justice will file a motion with the Fifth Circuit to hold the appeal in abeyance while the Department of Labor undertakes further rulemaking to determine what the salary level should be.

Though it appears that the department of labor may try to change the threshold for qualifying for overtime, the current overtime pay guidelines will remain in effect until the situation is resolved.