Overtime pay sounds simple. Work extra hours, get extra pay. But the actual wage and hour rules trip up plenty of employees and employers alike. Not everyone qualifies. The rate isn’t always what you’d expect. And a few states have their own extra layers on top of federal law. Here’s how it actually works.
What Counts as Overtime Under Federal Law
The Fair Labor Standards Act (FLSA) sets the baseline rule. Non-exempt employees must receive overtime pay for any hours worked beyond 40 in a single workweek. The overtime rate is at least 1.5 times the employee’s regular rate of pay. This is federal law, so it applies nationwide, though some states set stricter rules on top of it. You can read the full regulation on the Department of Labor’s overtime pay page.
How Overtime Pay Is Calculated
The formula itself is simple:
Overtime Pay = Overtime Hours × (Regular Hourly Rate × 1.5)
Real Example: $22/Hour, 46 Hours Worked
Let’s run the numbers for a real week.
- Hourly rate: $22
- Hours worked: 46
- Regular hours: 40
- Overtime hours: 6
Regular pay: 40 × $22 = $880
Overtime rate: $22 × 1.5 = $33/hour
Overtime pay: 6 × $33 = $198
Total weekly pay: $880 + $198 = $1,078
That extra $198 comes purely from the six overtime hours, paid at 50% more than the standard rate.
Exempt vs Non-Exempt Employees
Not every employee qualifies for overtime. The FLSA splits workers into two categories:
- Non-exempt employees — entitled to overtime pay under federal law, typically includes most hourly workers
- Exempt employees — not entitled to overtime pay, generally salaried employees meeting specific duties tests (executive, administrative, professional, or certain other categories) and earning above a minimum salary threshold
The exemption rules are more complex than they look. Job title alone doesn’t determine exempt status. The actual duties performed, and the salary level, both matter. SHRM’s guide to exempt vs non-exempt classification covers the specific duties tests in detail, since misclassification is one of the most common wage and hour violations employers face.
Calculating Overtime With Bonuses and Multiple Pay Rates
Overtime calculations get more complex when bonuses or multiple pay rates enter the picture. Non-discretionary bonuses (tied to specific performance metrics or promised in advance) generally must be factored into the “regular rate” used for overtime calculations, not just the base hourly wage. Similarly, employees working at two different pay rates in the same week often need a weighted average rate calculated first, before the overtime multiplier applies. Nolo’s overtime pay guide walks through both of these more complex scenarios with worked examples.
State-Specific Overtime Rules (California and Beyond)
Some states go further than federal law. California, for example, requires overtime pay for any hours worked beyond 8 in a single day, not just beyond 40 in a week — a meaningful difference from the federal standard. California also has a separate double-time rule, paying 2x the regular rate for hours worked beyond 12 in a day, or beyond 8 hours on a seventh consecutive workday. Always check your specific state’s labor department, since state rules can be significantly more generous than federal minimums.
Common Overtime Mistakes Employers Make
- Misclassifying employees as exempt to avoid paying overtime, without meeting the actual duties and salary tests required
- Forgetting to include bonuses in the regular rate calculation used for overtime
- Averaging hours across pay periods instead of calculating overtime strictly on a workweek basis, which federal law requires
- Ignoring stricter state rules, particularly daily overtime requirements in states like California
Calculate your exact overtime pay. Use the Overtime Calculator →
Frequently Asked Questions
Is overtime pay taxed at a higher rate?
No. Overtime pay is taxed at your regular marginal tax rate, not a special “overtime rate.” It can push some income into a higher bracket for that specific pay period, which is often why an overtime paycheck feels more heavily taxed, even though the underlying tax rules are the same.
Do salaried employees get overtime pay?
It depends on exempt status, not just whether someone is salaried. Many salaried employees are non-exempt and still entitled to overtime, particularly if their salary falls below the federal exemption threshold or their actual job duties don’t meet the specific exemption tests.
What is the federal overtime threshold?
Under federal law, non-exempt employees are entitled to overtime pay for any hours worked beyond 40 in a single workweek, calculated at a minimum of 1.5 times their regular hourly rate.
Can my employer give me time off instead of overtime pay?
For private-sector, non-exempt employees, generally no — federal law requires actual overtime pay, not “comp time,” except in specific public-sector situations. Some states have additional restrictions on this practice as well.
How is overtime calculated for someone with two different pay rates?
When an employee works at two different rates in the same workweek, employers generally must calculate a weighted average regular rate first, then apply the 1.5x overtime multiplier to that blended rate for any overtime hours worked.
Does California have different overtime rules than federal law?
Yes. California requires daily overtime for hours worked beyond 8 in a single day, along with double-time pay for hours beyond 12 in a day or beyond 8 hours on a seventh consecutive workday, both of which go further than the federal 40-hour weekly threshold.