Overtime looks like the easiest calculation in payroll. Time-and-a-half over 40 hours. What’s to get wrong?
Plenty, as it turns out. Overtime is behind a huge share of wage-and-hour claims, and it’s almost never because someone couldn’t multiply by 1.5. It’s because they overtimed the wrong person, used the wrong rate, or averaged hours across the wrong stretch of time. Let’s get all three right.
The short answer
To calculate overtime, multiply the employee’s regular rate of pay by 1.5, and pay that rate for every hour worked beyond 40 in a single workweek. A $20 an hour employee who works 45 hours gets 40 hours at $20 plus 5 hours at $30, for $950 that week. Overtime is always measured per workweek, never averaged across two.
Who actually gets overtime
This is where the real money mistakes happen, so start here, not with the math.
Under federal law, employees are either non-exempt (owed overtime) or exempt (not owed it). To be exempt, a worker has to pass all of these, not just one:
- Paid on a salary basis, a fixed amount that doesn’t drop based on hours or quality of work
- Paid at least the threshold, which is $684 a week (about $35,568 a year) as of 2026
- Actually doing exempt duties, meaning genuine executive, administrative, or professional work, judged by what they do day to day, not their job title
Miss any single one and the person is non-exempt, no matter what their offer letter says. This is the trap: a business puts someone on salary, calls them a manager, and assumes overtime doesn’t apply. If that “manager” spends the day doing the same work as the hourly staff, the title doesn’t protect you. They’re owed overtime, and it adds up fast when it’s discovered a year later.
Calling someone salaried is a bit like calling a worker a 1099 contractor: the label doesn’t decide it. The real relationship does.
The math, step by step
Once you know someone is non-exempt, here’s the calculation:
- Find the regular rate. For a straight hourly worker, that’s just their hourly wage.
- Multiply by 1.5 to get the overtime rate.
- Count hours over 40 in the workweek. Only hours past 40 in that single week count.
- Pay 40 at the regular rate, the rest at the overtime rate.
So $18 an hour, 47 hours worked: 40 hours at $18 is $720, plus 7 hours at $27 is $189, for $909 that week.
The parts that trip people up
“Regular rate” isn’t always the hourly wage. If a non-exempt employee earns a nondiscretionary bonus or commission, that money often has to be folded into the regular rate before you calculate overtime, which nudges the overtime rate up. A flat hourly wage is simple. Add other pay and the regular rate needs a closer look.
You can’t average across weeks. Someone who works 30 hours one week and 50 the next worked 10 hours of overtime, period. It does not average to 40 and 40. Overtime is a workweek-by-workweek measurement, even when your pay schedule covers two weeks at once. This alone is a reason biweekly pay is easier to run than semimonthly.
States can be stricter than federal. Some states require daily overtime (over 8 hours in a day, not just 40 in a week) or have a higher salary threshold for exemption. Federal law is the floor, not the ceiling. Always check your state’s rule on top of the federal one.
Comp time usually isn’t legal for private employers. Offering an hourly employee time off later instead of overtime pay is generally not allowed in the private sector. If they earned overtime, they get paid overtime.
Why it’s worth getting right the first time
Overtime mistakes don’t announce themselves. They sit quietly until an employee files a complaint or you get audited, and then they come due in back pay, often for multiple employees at once and going back years. The fix is cheap up front and expensive in hindsight.
If you’re not sure whether someone on your team is exempt, that’s the exact question to settle before the next pay run. Start with how to run payroll step by step to see where overtime fits, and book a free intro call if you want a specific role reviewed.
This is general education, not legal or tax advice for your specific situation. Overtime rules and salary thresholds vary by state and change over time, so confirm the current standard before you classify anyone.
Frequently asked
How do you calculate overtime pay?
Multiply the employee's regular hourly rate by 1.5, then pay that for every hour worked over 40 in a single workweek. For example, a $20 an hour employee who works 45 hours is paid 40 hours at $20 and 5 hours at $30. Overtime is figured per workweek, not per pay period.
Who is exempt from overtime?
An employee is exempt only if they meet all of the tests: they're paid on a salary basis, that salary is at least the federal threshold ($684 a week, or $35,568 a year, as of 2026), and their actual job duties fit an exempt category like executive, administrative, or professional. Miss any one and they're owed overtime, salary or not.
Do salaried employees get overtime?
Sometimes, yes. Being paid a salary does not automatically make someone exempt. If a salaried worker earns below the threshold or their duties don't meet the exemption tests, they're non-exempt and owed overtime just like an hourly worker.