How to Calculate Overtime Pay (With Examples)
Overtime is one of the easiest parts of a paycheck to get wrong, both for the people earning it and sometimes for the payroll system paying it. Here's how it's figured, with examples you can check against your own stub.
The basic rule
Under federal law, most hourly workers earn time-and-a-half for every hour over 40 in a workweek. "Time-and-a-half" means 1.5 times your regular hourly rate.
At $20 an hour, an overtime hour pays $30.
Example: one long week
You earn $20 an hour and work 46 hours in a week.
| Hours | Rate | Pay | |
|---|---|---|---|
| Regular | 40 | $20 | $800 |
| Overtime | 6 | $30 | $180 |
| Total | 46 | $980 |
The week-by-week rule
Overtime is counted per workweek, not per paycheck. This matters if you're paid every two weeks.
Say you earn $22 an hour and work 50 hours one week and 30 the next. That's 80 hours, which looks like two normal weeks. It isn't:
| Hours | Pay | |
|---|---|---|
| Week 1 regular | 40 | $880 |
| Week 1 overtime | 10 at $33 | $330 |
| Week 2 regular | 30 | $660 |
| Total | 80 | $1,870 |
If someone averaged the two weeks, they'd pay 80 straight-time hours: $1,760. The correct figure is $110 more. Your employer can't average hours across weeks to avoid overtime.
What counts as "hours worked"
Paid time off, holidays and sick hours usually don't count toward the 40, unless your employer's policy or union contract says otherwise. So a week with 8 hours of holiday pay and 40 hours on the job is often paid as 48 hours, with no overtime. Check your handbook.
When overtime starts earlier
Federal law sets the minimum. Some employers and some states go further:
- A few states require overtime after a certain number of hours in a day, not just a week. California is the best-known example.
- Some union contracts and company policies pay overtime after 8 hours in a day, or for weekends.
- Some jobs pay double time in certain situations.
If your stub shows overtime you didn't expect (or doesn't show overtime you did expect), the rules for your state and your employer are where to look.
Who doesn't get overtime
Many salaried workers are "exempt" from overtime under federal law, based on their salary level and job duties. If you're salaried, your offer letter or HR department can tell you whether you're exempt.
Check your own week
Try the free Overtime Paycheck Calculator: enter your rate and hours for each week of the pay period, and it shows regular pay, overtime and the total, using the week-by-week rule.
And if you work a lot of overtime this year, read how the overtime tax deduction actually works. It can add to your refund.