Calculate Overtime Pay

Overtime pay is the pay employees receive for hours worked in excess of 40 hours during a work week. In some states, like California, overtime pay also refers to the number of hours an employee works in excess of eight hours a day. Overtime pay is determined according to an employee's regular rate of pay.

Steps

Understanding Overtime Pay Rules

  1. Find your state's minimum wage. Because an employee's overtime pay rate is based on their hourly wage, which for many is often the minimum wage, it is important to know what the minimum wage is in your state. Under the Fair Labor Standards Act (FLSA), the hourly minimum wage for employees is $7.25.[1]
    • States may set higher minimum wages. In California, the minimum hourly wage is $9.00. In the District of Columbia, the minimum wage is $10.50.[2]
    • For a complete listing of state minimum wage laws, click here.
  2. Understand federal overtime rules. According to the FLSA, eligible employees must receive overtime pay for hours worked over a 40-hour work week. The overtime pay, also called "premium pay," must be at least 1.5 times an employee's regular rate of pay.[3]
    • The act applies on a “workweek basis.” A workweek is a fixed and regularly recurring period of 168 consecutive hours and need not run from Monday to Sunday.[4] Your workweek may run from Wednesday to Tuesday. You will then be paid overtime for work in excess of 40 hours during this time period.
    • Employers may not average hours over multiple weeks.[5]
  3. Understand state overtime rules. Many states have supplemented the FLSA with their own laws. These state laws mandate overtime pay in additional situations. States like Alaska and California, for example, also grant employees "premium pay" for working more than eight hours in a day.[6]
    • State rules can be complex. California, for example, also grants an employee who works over 12 hours a day double their regular rate of pay for time worked in excess of 12 hours. Someone who works 13 hours a day will receive their regular rate of pay for the first eight hours, 1.5 times premium pay for the next four hours, and then double their regular rate of pay for the final hour.
    • California and other states also award overtime pay to those who work seven consecutive days. On the seventh day, the employee receives 1.5 their regular rate of pay for the first eight hours worked on this day. For work in excess of eight hours on the seventh day, the employee receives double their regular rate of pay.
  4. Find out if you are eligible for overtime pay. Both state and federal laws exempt certain groups of employees from overtime pay requirements. For example, employees at seasonal amusement or recreational establishments and seamen employed on foreign vessels are exempt.
    • Furthermore, people who work in executive, administrative, and professional positions are also exempt. This group includes teachers as well as academic administrative personnel in elementary and secondary schools.
    • State laws also have their own exemptions. You should read your state law, which you can find by visiting your state’s Department of Labor website.

Calculating Overtime Pay

  1. Find your regular rate of pay. If you are an hourly wage worker, then your regular rate of pay is the standard hourly rate of pay. However, if you are salaried then you must convert your salary into an hourly rate of pay. To do so, divide your weekly salary by 40.
    • For instance, if you receive $1600 a month, then you receive $369.23 a week, which translates into $9.23 an hour.
  2. Calculate based on federal overtime law. If you live in a state (like Texas) that follows the federal minimum wage and overtime rules, then you will receive 1.5 times your regular rate of pay for hours worked in excess of 40 a week. Accordingly, if you worked 44 hours in a week, then 40 hours would be paid at your regular rate ($7.25 x 40 = $290.00). The next four hours are paid at time-and-a-half, so multiple the hours (four) by your regular rate ($7.25) by 1.5. You earned an additional $43.50 in overtime.
    • If your state has a minimum wage of $9.00 an hour and follows the federal overtime rules, then the first 40 hours would yield $360 (40 x $9.00). The extra four hours of overtime would be multiplied by your regular rate of $9.00 times 1.5. You earned an extra $54.00 in overtime.
  3. Calculate based on state specific rules. If the state has daily overtime rules, then you earn overtime for any work in excess of eight hours a day. For example, suppose you work six hours a day Monday through Wednesday. On Thursday and Friday, you work 10 hours each day. Your pay for Thursday and Friday will be calculated as follows:
    • The first eight hours of each day will be at your regular rate of pay (say $10). You will earn $80 on each day.
    • Then, the next two hours will be paid at time-and-a-half: two hours times $10 times 1.5 = $30 extra, for a total of $110 on Thursday and $110 on Friday. Although you worked less than 40 hours for the week, you get overtime for those days where you worked more than eight hours.
  4. Calculate overtime pay in states with additional weekly overtime rules. In addition to daily and standard weekly overtime rules, some states have overtime laws which require employees be compensated an additional overtime rate (1.5 the regular rate of pay) for the first eight hours of work they perform on the seventh consecutive day worked in a workweek. Accordingly, if you work five hours a day for seven straight days, the first six days are compensated at regular pay but the hours worked on the seventh day are paid at the overtime rate.
    • To illustrate: If your regular rate of pay is $10.00, then you would earn $300.00 for the 30 hours worked Monday through Saturday, and then you would earn time-and-a-half for the five hours worked on Sunday. To calculate, multiply the hours (five) by your regular rate ($10.00) by 1.5. You would earn $75.00 on Sunday, bringing your weekly total to $375.00.
    • By contrast, a worker who works in a state without this weekly rule would earn $10.00 an hour for all 35 hours worked and would make $350.00.
    • If you worked nine hours on the seventh day, then the first eight would be paid at time-and-a-half. The ninth hour would be double your regular rate of pay ($20 for the hour).

Tips

  • If you are not being paid overtime according to your calculations, then you should raise the issue with your employer. Employers are required by federal and state law to pay overtime if you qualify. To report a violation, contact your state agency, which you can find by visiting this website.
  • State minimum wage laws change regularly. You should always consult your state’s Department of Labor website to find the prevailing minimum wage.
  • Pay attention to your job duties. If you are an employee exempted from overtime, then make sure your employer isn’t trying to load you up with duties a non-exempt employee would perform.

Warnings

  • Contrary to popular misconception, salaried employees are not immediately exempted from overtime pay simply because they are salaried. Instead, there is a complicated two-part test: the employee must be paid a salary of at least $455 a week and must perform the duties of an exempt employee.[7] If you are unsure whether your employees qualify for an exemption, you should contact your employment lawyer.

References

  1. ↑ http://www.dol.gov/whd/minimumwage.htm
  2. ↑ http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx
  3. ↑ http://www.dol.gov/whd/overtime_pay.htm
  4. ↑ http://www.dol.gov/whd/overtime_pay.htm
  5. ↑ http://www.dol.gov/whd/overtime_pay.htm
  6. ↑ http://www.dol.gov/whd/minwage/america.htm
  7. ↑ https://www.workplacefairness.org/overtime-exemptions#7
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