How and When to Calculate Overtime Pay

Do you have hourly employees who exceed the 40-hour work week? If so, they need to be paid overtime!  

With the Department of Labor issuing new overtime threshold guidance soon, knowing the ins and outs of your overtime policy is critical to continued success. For example, do you calculate daily or weekly? Do you use the standard 1.5x rate? 

Overtime pay processes can vary, so it’s important to understand the nuances to ensure that your employees don’t get underpaid. These processes can be complex, due to state laws, employee salaries, and other factors. So—let’s make it simpler for you.  

When Is Overtime Calculated?  

Overtime occurs when a non-exempt employee exceeds a 40-hour work week and is compensated at a minimum of time and one-half their regular pay rate. This is required under The Fair Labor Standards Act (FLSA) to prevent employee exploitation. However, there are nuances to this because of different state laws—most importantly, how it is calculated.  

Do Salaried Employees Get Overtime Pay? 

Typically, salaried employees are not considered for overtime pay; however, there are exceptions. First, it depends on whether or not the salaried employee is considered an exempt employee. In most cases, salaried employees are also exempt, which would mean that they are not eligible for overtime pay, no matter how many hours are worked during a workweek.

However, if a salaried employee is non-exempt, they may still be eligible for overtime pay. A 2024 overtime threshold rule change may impact your organization's payroll by making salary workers eligible for overtime. 

How to Calculate Overtime 

To calculate overtime pay, use the following formula: 

Standard Hourly Rate x 1.5 = OT pay

For more examples and a deeper understanding of overtime pay, check out our blog: Time and a Half Calculations, With Examples.  

When Is Overtime Calculated? 

In most scenarios, overtime is calculated on a weekly basis; however, there are some states that require overtime to be calculated daily. The regulations for daily overtime vary within each of those states. Here are some examples:

Colorado: Overtime pay is required after exceeding 12 hours of work in a day.

Oregon: Overtime pay is required after exceeding 10 hours of work in a day. 

California: Any hours worked beyond 8 in a single day is considered overtime. Also, if an employee works up to 8 hours on the seventh consecutive workday within that workweek, that employee will receive overtime for those hours. If the employee works more than 12 hours or if that employee exceeds 8 hours on the 7th consecutive day, they are to receive at least two times the typical pay rate. 

Puerto Rico, The Virgin Islands, Alaska, and Nevada: All require employees to be paid one and a half the normal rate should they work beyond 40 hours in a week, or 8 hours in a given day. 

For states that do not have specific overtime laws, they must adhere to the federally mandated overtime schedule provided in the FLSA, which states that any employee exceeding 40 hours in a workweek must be paid time and one-half for each additional hour.  

What Should Employers Know About Overtime? 

Employers should be familiar with the state regulations regarding overtime pay. If you are an HR professional that is operating in multiple states, it’s critical to be fully aware of the individual state laws to ensure each employee gets properly paid for the number of hours worked.  

Tracking hourly employees is not only a hassle but carries a high risk if any calculations are wrong. Some small employers still track hours using timecards, or even spreadsheets, but these methods are prone to error—and no one likes a wrong paycheck. If an employee is working overtime, they are looking forward to that extra boost on their paycheck, so it’s critical to your workforce’s continued satisfaction to get things right the first time, every time, and on time.   

Your solution is an HRIS. A human resources information system utilizing a time and attendance feature will track hours worked and automatically calculate any overtime hours. This data naturally populates in an all-in-one HRIS’s payroll feature, so hours and overtime data are correct and on time each pay period. No more spreadsheets tracking attendance, time-consuming math for overtime needs, or angry employees missing their hard-earned money. 

If you want to learn more about how HR technology can improve how your employees (and your boss!) view and trust your role, then chat with an expert at your convenience. 

Additional Resources

You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources: 

• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• BerniePortal Blog—a one-stop shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• Resource Library—essential guides covering a comprehensive list of HR topics
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics 
• BerniePortal Community—an HR community to learn from others and share your experiences