Under the US Fair Labor Standards Act, non-exempt employees are owed overtime for hours worked over 40 in a workweek, at one and a half times their regular rate of pay. To calculate it, total the hours for the workweek, subtract 40 and multiply the extra hours by 1.5 times the regular rate. Some states, including California, also count overtime by the day.
Key takeaways
- Federal overtime: over 40 hours in a workweek, at 1.5 times the regular rate.
- Each workweek stands alone. Hours cannot be averaged over two weeks.
- Weekends and holidays are not overtime in themselves under federal law.
- Overtime that was worked must be paid, even if nobody approved it.
What is the overtime formula?
Overtime pay = (hours worked − 40) × regular rate × 1.5
Example: 46 hours at $20.00 an hour. Regular pay is 40 × $20.00 = $800.00. Overtime pay is 6 × $30.00 = $180.00. Total: $980.00
What are the federal rules?
They come from the Department of Labor's Fact Sheet 23.
Federal overtime at a glance
- Threshold
- Hours over 40 in a workweek
- Rate
- Not less than one and a half times the regular rate
- Workweek
- A fixed and regularly recurring period of 168 hours
- Averaging
- Not permitted across two or more weeks
- Weekends and holidays
- No overtime required for those days as such
- Limit on hours
- None for employees aged 16 and older
- When it is paid
- On the regular pay day for the period in which it was earned
The workweek does not have to match the calendar week. It can start on any day and at any hour, as long as it is fixed.
How do you calculate overtime step by step?
Fix the workweek
For example, Monday 00:00 to Sunday 24:00. Use the same one every week.
Total the hours worked
Add every hour worked in that workweek, including time nobody asked for.
Subtract 40
The remainder is overtime hours. If the total is 40 or less, there is none.
Find the regular rate
For an hourly employee it starts with the hourly rate. Some bonuses and other pay must be included.
Multiply
Overtime hours × regular rate × 1.5.
To turn hours and minutes into a figure you can multiply, see minutes to decimal hours.
Why can you not average two weeks?
Because each workweek stands alone.
| Week 1 | Week 2 | Two-week total | |
|---|---|---|---|
| Hours worked | 30 | 50 | 80 |
| Overtime hours | 0 | 10 | 10 |
The two weeks average 40 hours, and 10 hours of overtime are still owed for week 2. This is the most common error on biweekly payrolls.
How does California's daily overtime work?
California counts overtime by the day as well as the week. The rules below are from the state's Division of Labor Standards Enforcement.
On the seventh consecutive day of work in a workweek, the first 8 hours are paid at 1.5 times the regular rate and hours beyond 8 at double.
Example. A 13-hour day at $20.00 an hour: 8 hours at $20.00, 4 hours at $30.00 and 1 hour at $40.00. That is $160.00 + $120.00 + $40.00 = $320.00.
Other states have their own rules. Check each state where you have employees.
Does unauthorized overtime have to be paid?
Yes. Under federal rules, work that was not requested but was suffered or permitted is work time and must be paid. California says the same: overtime must be paid whether authorized or not.
An employer can still have a rule that overtime needs approval, and can discipline someone who breaks it. It cannot refuse to pay for the hours.
What mistakes are common?
Do
- Count every hour worked, including early starts and late finishes
- Calculate each workweek on its own
- Include required extras, such as some bonuses, in the regular rate
- Check state rules for daily overtime
Do not
- Average hours across a two-week pay period
- Round time down to the schedule
- Treat a salaried title as proof of exemption
- Ignore work done outside tracked hours
Whether an employee is exempt depends on duties and salary tests that change over time. Check the current rules with the Department of Labor or a payroll adviser.
How do you track overtime accurately?
Overtime is only as accurate as the daily hours behind it. Three things matter.
- Daily records. You need hours for each day and a total for each workweek.
- Time outside the schedule. If people work late, that time has to reach the record.
- No shaving. Rounding must not trim worked time. See the 7-minute rule.
How does BirdsEye help with overtime?
BirdsEye records working time automatically and totals it by day and week. It does not calculate overtime pay or run payroll. What it gives payroll is an accurate record.
One setting deserves attention. BirdsEye tracks only inside the working hours you set, which protects private time. Time worked outside those hours is not recorded automatically, and it must still be paid. Two features cover it:
- Schedule extension. If you allow it, people extend their own tracking by one hour, four hours or until the end of the day. This is on the Team plan and above.
- Manual time entry. Time worked away from the computer or outside the schedule can be added by hand.
Time entries export as CSV. See time tracking.
Frequently asked questions
Is overtime paid after 8 hours a day or 40 hours a week?
Under federal law, after 40 hours in a workweek. Some states add daily overtime. California pays 1.5 times the regular rate after 8 hours in a day and double after 12.
Is working on a weekend or holiday overtime?
Not by itself under federal law. Those hours count toward the 40 like any others.
Can an employer average hours over two weeks?
No. Each workweek is calculated separately.
How is overtime calculated for salaried employees who are not exempt?
The regular rate is worked out from their pay and the hours it covers, and overtime is owed on hours over 40. The calculation depends on the pay arrangement, so take payroll advice.