How to Calculate Overtime Pay (FLSA Rules + Examples)

Understanding how to calculate overtime pay correctly protects you from wage theft and helps you plan your budget accurately. Whether you’re an employee tracking your hours or a manager processing payroll, these rules matter.

Federal Overtime Rules Under the FLSA

The Fair Labor Standards Act (FLSA) sets the baseline for overtime across the United States. The core rule is simple: non-exempt employees must be paid 1.5 times their regular rate of pay for all hours worked beyond 40 in a single workweek.

A workweek is any fixed, regularly recurring period of 168 hours — seven consecutive 24-hour periods. It doesn’t have to align with the calendar week.

Who Is Covered?

Most hourly workers are automatically covered. Salaried employees are covered unless they meet both a salary threshold ($684/week minimum) AND pass a duties test for executive, administrative, or professional exemptions.

Calculating the Regular Rate of Pay

The “regular rate” isn’t always just your hourly wage. The FLSA requires you to include most additional pay in the calculation.

Regular rate formula:

Regular Rate = Total Weekly Compensation ÷ Total Hours Worked

What’s Included in the Regular Rate

Included	Excluded
Base hourly wages	Discretionary bonuses
Non-discretionary bonuses	Vacation/holiday pay
Shift differentials	Gifts
Commissions earned during the week	Expense reimbursements
Piece-rate earnings	Stock options

Example: Hourly Employee with a Bonus

Maria earns $18/hour and worked 48 hours this week. She also received a $100 non-discretionary production bonus.

1. Base pay for 48 hours: $18 × 48 = $864
2. Total compensation: $864 + $100 bonus = $964
3. Regular rate: $964 ÷ 48 = $20.08/hour
4. Overtime premium (for 8 overtime hours): $20.08 × 0.5 × 8 = $80.33
5. Total pay: $964 + $80.33 = $1,044.33

Note: The base pay already covers the straight-time portion of OT hours. The premium is the extra 0.5x, not the full 1.5x.

Step-by-Step Overtime Calculation

For a simpler hourly-only scenario:

Employee: James, $22/hour, worked 50 hours

1. Regular hours: 40 × $22 = $880
2. Overtime hours: 10
3. Overtime rate: $22 × 1.5 = $33/hour
4. Overtime pay: 10 × $33 = $330
5. Total gross pay: $1,210

Use our paycheck calculator to see how taxes will affect this amount.

California Daily Overtime Rules

California is significantly more employee-friendly than federal law. California overtime applies on a daily basis, not just weekly.

Hours Worked	Rate
First 8 hours per day	Regular rate (1x)
Hours 9–12 per day	1.5x
Over 12 hours per day	2x
First 8 hours on 7th consecutive day	1.5x
Over 8 hours on 7th consecutive day	2x

California Example

Sarah earns $20/hour and works Monday through Friday, 10 hours each day (50 hours total).

Under federal rules: 10 overtime hours at $30/hour = $300 OT premium.

Under California rules:

• Each day: 8 regular hours + 2 daily OT hours
• Daily OT: 2 hours × $30 × 5 days = $300
• Weekly OT check: 50 hours - 40 = 10 hours already covered by daily OT
• Total OT premium: $300

In this case it’s the same, but if Sarah worked four 12-hour days, California’s daily rules would trigger significantly more overtime pay.

How Overtime Affects Your Taxes

Overtime income is taxed the same as regular income — but timing matters. A large overtime check can temporarily push you into a higher withholding bracket for that pay period because employers use annualized withholding tables.

This doesn’t mean you’ll actually owe more taxes at year-end. You may even get a refund if your effective rate was lower than what was withheld.

Rough tax impact at different wage levels on $500 of overtime pay:

Annual Salary	Federal Marginal Rate	Estimated Federal Tax on $500 OT
$45,000	22%	~$110
$90,000	22%	~$110
$200,000	32%	~$160
$400,000	35%	~$175

Plus FICA taxes (7.65%) up to the Social Security wage base ($176,100 for 2026), and state income taxes vary.

To see your full net pay after overtime, use the paycheck calculator or compare two salary scenarios with our compare tool.

Common Overtime Mistakes to Avoid

• Off-the-clock work: If your employer benefits from work you do before clocking in or after clocking out, that time counts toward overtime.
• Averaging hours across weeks: Employers cannot average two weeks to avoid overtime. Each workweek stands alone.
• Comp time in private sector: Private employers cannot legally substitute comp time for overtime pay (only government employers can).
• Misclassifying employees: Calling someone a “manager” doesn’t automatically exempt them from overtime — the duties test must be met.

If you believe you’re owed unpaid overtime, you can file a complaint with the Department of Labor’s Wage and Hour Division.