Overtime pay is the higher rate employers owe non-exempt employees for hours worked beyond 40 in a workweek. Under the federal Fair Labor Standards Act, that rate is at least one and a half times the employee’s regular hourly pay. It is meant to compensate workers fairly for extra hours and to discourage employers from overscheduling staff.
Overtime pay is extra compensation for time worked past a legal threshold, most commonly 40 hours in a single workweek. The federal floor is 1.5 times the regular rate, though several states add their own rules, such as daily overtime after eight hours. Whether someone qualifies depends on their exemption status, not simply on how many hours they work. The premium increases gross earnings before any deductions reduce net pay.
Employers calculate overtime on the “regular rate of pay,” which can include more than base wages. The usual steps are:
A worker classified as full-time is not automatically owed overtime; eligibility hinges on whether they are exempt or non-exempt. Many salaried roles are exempt, but only if they meet specific duties and salary tests. The number of standard full-time hours a company sets does not change the 40-hour federal overtime line.
Maria earns $20 an hour and works 46 hours in one week. Her first 40 hours pay $800. Her six overtime hours pay $30 each (1.5 × $20), adding $180. Her gross for the week is $980. If Maria is paid on a biweekly schedule, that overtime is added to the relevant week within the pay period, not averaged across both weeks, because overtime is figured per workweek.
The dividing line is exemption. Non-exempt employees must receive overtime; exempt employees do not. To be exempt, a worker generally must be paid on a salary basis above a set threshold and perform certain executive, administrative, or professional duties. Misclassifying a non-exempt worker as exempt is one of the most common and expensive wage-and-hour mistakes employers make.
Under federal law, non-exempt employees earn at least 1.5 times their regular rate for hours over 40 in a workweek. Some states set additional daily overtime rules that can require more.
It depends on exemption status. Salaried employees who do not meet the FLSA exemption tests are still entitled to overtime pay.
Nondiscretionary bonuses are added into the regular rate before the overtime multiplier is applied, which increases the overtime owed.
