How to Calculate Overtime Pay: Formulas, State Rules and Worked Examples

By The Invoice Makers team · Updated November 1, 2026 · 9 min read

To calculate overtime pay in the US, multiply the employee's regular rate of pay by 1.5 and then by the number of hours worked over 40 in the workweek. For someone earning $20 an hour who works 46 hours, that is $20 × 1.5 = $30 an hour for 6 overtime hours, or $180, on top of $800 for the first 40 hours: $980 in total. That is the federal rule under the Fair Labor Standards Act (FLSA). Some states, including California, Alaska, Nevada and Colorado, also require overtime based on daily hours.

Key takeaways

• Federal law requires at least 1.5 times the regular rate for hours over 40 in a workweek for non-exempt employees.
• The regular rate includes non-discretionary bonuses and most other pay, not just the hourly wage.
• Each workweek stands alone; you cannot average hours across two weeks.
• Some states add daily overtime, and when federal and state rules differ, the employee gets whichever is more generous.
• Convert minutes to decimal hours (minutes ÷ 60) before multiplying, and round only at the end.
• Independent contractors are not covered by overtime law; they set their own rates.

The federal overtime rule in plain English

Under the FLSA, covered non-exempt employees must be paid overtime for hours worked over 40 in a workweek at a rate of at least one and a half times their regular rate of pay. According to the US Department of Labor:

• A workweek is a fixed, recurring period of 168 hours, seven consecutive 24-hour periods. It does not have to match the calendar week; it can start on any day and at any hour, but it must stay the same.
• Averaging is not allowed. If someone works 30 hours one week and 50 the next, they are owed 10 hours of overtime for the second week, even though the two weeks average 40.
• Federal law has no daily limit. A 12-hour shift does not trigger federal overtime by itself; only the weekly total counts. State law may be different.
• Weekend and holiday work is not automatically overtime under federal law. Premium pay for those days is a matter of company policy or contract.

The basic formula is:

Step 1: Find the regular rate of pay

The regular rate is not always the same as the hourly wage. The DOL defines it as total pay for the workweek, minus certain excluded payments, divided by the total hours actually worked (see the DOL's regular rate fact sheet).

What usually goes in:

• Hourly wages and salary
• Non-discretionary bonuses, such as production, attendance, safety or sales bonuses that employees were promised in advance
• Commissions
• Shift differentials and other premiums for working certain hours

What can usually be left out:

• Truly discretionary bonuses, where both the decision to pay and the amount are at the employer's sole discretion and were not promised in advance
• Gifts, such as a holiday gift not tied to hours or productivity
• Pay for time not worked, such as vacation, holiday or sick pay
• Reimbursed business expenses

The label does not decide the question. A "holiday bonus" that every employee is promised if they hit a target is non-discretionary and must be included.

Step 2: Count overtime hours for the workweek

Add up all hours actually worked in the workweek. Anything over 40 is overtime under federal rules. A time card calculator makes this quick when you are adding up start and end times with breaks.

Converting minutes to decimal hours

Payroll math needs hours as decimals. Divide the minutes by 60:

So 42 hours 20 minutes is 42.33 hours, and 2 hours 20 minutes of it is overtime. To avoid rounding errors, keep extra decimals until the end: 140 minutes ÷ 60 = 2.3333 hours, and 2.3333 × $30 = $70.00. Rounding to 2.33 first gives $69.90, which shortchanges the employee by 10 cents. If you round time punches, the DOL allows rounding to the nearest 5, 6 or 15 minutes only if it averages out so employees are not underpaid over time.

Step 3: Apply the multiplier

Multiply the overtime hours by 1.5 times the regular rate. With bonuses, it is simplest to pay straight time for all hours plus the bonus, find the regular rate, then add a half-rate premium for each overtime hour.

Worked examples

Example 1: Hourly employee, 46 hours

Example 2: Hourly employee with a production bonus

An employee earns $18 an hour, works 45 hours and earns a $90 production bonus for the week.

Check: 40 × $20 = $800, plus 5 × $30 = $150, also gives $950. If the bonus had been ignored, the employee would have received only $855 (40 × $18 + 5 × $27), $95 less than owed. If a bonus covers several weeks, such as a quarterly bonus, it generally has to be spread back over those weeks and extra overtime paid for any week that had overtime hours.

Example 3: Non-exempt salaried employee

Salaried does not automatically mean exempt. Suppose an employee earns a $900 weekly salary intended to cover 40 hours and works 45. The regular rate is $900 ÷ 40 = $22.50. Overtime is 5 × $33.75 = $168.75, for total pay of $1,068.75. To convert an annual salary into an hourly figure, try the salary to hourly calculator.

Example 4: California daily overtime

An employee in California earns $24 an hour and works 10, 8, 13, 8 and 6 hours Monday to Friday, 45 hours in total.

Pay is 38 × $24 = $912, plus 6 × $36 = $216, plus 1 × $48 = $48, for $1,176. Only 38 regular hours were worked, so there is no extra weekly overtime on top. Under the federal weekly rule alone, the same week would pay 40 × $24 + 5 × $36 = $1,140, so California's rules add $36. Hours already paid as daily overtime are not counted again toward weekly overtime.

State daily overtime rules

When state and federal law both apply, the employee is owed whichever standard pays more. Most states follow the 40-hour weekly rule, but a few go further:

Other states have their own rules, so check your state labor department before running payroll.

Exempt vs non-exempt employees

Overtime rules apply to non-exempt employees. Some employees are exempt, most commonly under the executive, administrative and professional (often called "white-collar") exemptions. To qualify, an employee generally has to meet three tests:

1. Salary basis: paid a predetermined, fixed salary that is not cut because of the quality or quantity of work.
2. Salary level: paid at least the federal minimum salary.
3. Duties: primarily doing executive, administrative or professional work as defined by the regulations.

The 2026 federal salary threshold is $684 per week ($35,568 a year). A 2024 rule that would have raised it was vacated by a federal court in November 2024, and on May 14, 2026 the DOL formally restored the 2019 regulations: $684 a week for the standard exemption and $107,432 in total annual compensation for highly compensated employees. Several states, including California, New York, Washington and Colorado, set higher salary thresholds, so the state figure may be what counts.

Job titles do not decide exemption: a "manager" who mostly stocks shelves is likely non-exempt whatever the salary.

Common overtime mistakes

• Leaving non-discretionary bonuses or commissions out of the regular rate.
• Averaging hours over a two-week pay period instead of checking each workweek.
• Offering private-sector employees time off later instead of overtime pay. Under the FLSA, comp time in place of overtime is generally limited to public employers.
• Not counting work done before or after a shift.
• Rounding minutes in a way that always favors the employer.

A note for freelancers and contractors

If you are a genuine independent contractor, overtime law does not apply to you. Nobody owes you time and a half for a 60-hour week. The flip side is that you control your rate, so build long hours into your pricing. Many freelancers bill hourly and track every hour with a billable hours calculator, or charge a rush rate (for example 1.5× for weekend or same-day work) that is written into their contract. To set a base rate that covers taxes, benefits and unbilled time, use the hourly rate calculator, and see the freelance invoice guide for how to show hours on an invoice.

Be aware that calling someone a contractor does not make them one. If a business controls when, where and how a person works like an employee, they may be misclassified and owed overtime.

Turn hours into pay or an invoice

Overtime math is simple once you have the right inputs: the true regular rate, accurate hours in decimals and the rules for your state. Add up your week with the time card calculator, and if you are billing a client for the hours instead, put them on a professional PDF with the free invoice generator.