How to Calculate Overtime Pay: A Complete Guide

Do you have hourly employees working beyond the standard 40-hour workweek? If so, understanding how to calculate overtime pay is crucial for compliance and employee satisfaction.

Do you calculate overtime daily or weekly? Do you always use the standard 1.5x rate? In this guide, we’ll simplify the nuances so you can confidently manage overtime pay calculations.

What Is Overtime Pay?

Overtime pay compensates non-exempt employees for working more than 40 hours in a workweek. According to the Fair Labor Standards Act (FLSA), employees must receive at least time and a half their regular pay rate for any overtime hours worked.

However, overtime rules can differ based on state laws, employee classifications, and payroll structures. Employers need to understand these distinctions to ensure compliance and fair compensation.

When Do Employees Qualify for Overtime Pay?

Overtime eligibility depends primarily on the employee’s classification:

Non-Exempt Employees: These employees must receive overtime pay when they exceed 40 hours in a week.
Exempt Employees: Most salaried workers are exempt from overtime pay, but exceptions exist.

Do Salaried Employees Get Overtime Pay?

While salaried employees are typically exempt, some may qualify as non-exempt based on their earnings and job duties. Employers should regularly review employee classifications to ensure compliance with current labor labor laws.

How to Calculate Overtime

Calculating overtime pay is straightforward with this formula:

Overtime Pay = Hourly Rate x 1.5 x Overtime Hours Worked

Example Calculation:

Regular hourly rate: $20
Overtime hours worked: 10
Overtime pay: $20 x 1.5 x 10 = $300

For a deeper look at overtime calculations, check out our blog: Time and a Half Calculations, With Examples.

State-Specific Overtime Rules

While federal law requires overtime after 40 hours in a week, some states enforce daily overtime rules:

California: Overtime applies after 8 hours per day or on the 7th consecutive workday.
Colorado: Overtime applies after 12 hours per day.
Oregon: Overtime applies after 10 hours per day.
Alaska, Nevada, Puerto Rico, Virgin Islands: Daily overtime rules mirror the federal standard for weekly overtime but add extra provisions for daily limits.

Employers operating in multiple states must monitor state-specific laws to remain compliant.

How to Measure and Track Overtime

To avoid miscalculations, regularly evaluate how overtime is tracked and reported:

Gather Feedback – Survey employees about job expectations and workloads.
Monitor KPIs – Identify performance trends that may signal excessive workloads or unclear responsibilities.
Leverage Technology – Use HR software to automate time-tracking and payroll calculations for greater accuracy.

Why Employers Should Automate Overtime Calculations

Tracking overtime manually can lead to errors and disgruntled employees. Automating payroll with an HRIS (Human Resources Information System) eliminates guesswork and streamlines compliance. Features like time and attendance tracking ensure hours are accurately calculated and overtime rules are consistently applied.

Ready to modernize your payroll system? Schedule a demo with BerniePortal to learn more.

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