How to Calculate Overtime Pay for Hourly Employees

Overtime math looks simple — time and a half — and the simplicity is exactly what causes most of the mistakes. The formula is straightforward; what most small businesses get wrong is what counts toward the base rate in the first place.

We're not employment lawyers, and overtime rules vary meaningfully by state, so treat this as the mechanics to understand rather than a substitute for checking your specific state's requirements. The overtime pay calculator will run the math once you know which rules apply to you.

The basic formula

Regular hourly rate × 1.5 × overtime hours worked.

An employee earning $22/hour who works 46 hours in a week: 6 hours at the overtime rate of $33/hour ($22 × 1.5), plus 40 hours at the regular rate. Total: $880 regular + $198 overtime = $1,078.

The federal baseline, and where states differ

Federal law (the Fair Labor Standards Act) requires overtime after 40 hours in a single workweek, for employees classified as non-exempt. That's the floor everywhere in the US.

Some states require more. California and a few others also require daily overtime — time and a half after 8 hours worked in a single day, regardless of the weekly total, and in California's case, double time after 12 hours in a day. A schedule of four 10-hour days triggers daily overtime in those states even though the week totals only 40 hours, which surprises businesses that only checked the weekly threshold.

Always confirm your specific state's rule before assuming the federal 40-hour threshold is the whole picture.

Salaried non-exempt employees still get overtime

A common and costly misunderstanding: being paid a salary does not automatically make someone exempt from overtime. Exemption depends on job duties and a minimum salary threshold, both defined by law — not on the fact that pay is structured as an annual or weekly figure rather than an hourly one.

For a non-exempt salaried employee, calculate a regular hourly rate by dividing the salary by the number of hours it's intended to cover (commonly 40), then apply time and a half to hours beyond that. A $760 weekly salary meant to cover 40 hours gives a $19 regular rate and a $28.50 overtime rate.

What counts toward the "regular rate" — the part everyone gets wrong

The regular rate used for the overtime multiplier isn't always just the base hourly wage. Non-discretionary bonuses — tied to production, attendance, or a performance metric known in advance — are generally required to be folded into the regular rate before the 1.5x multiplier is applied. A truly discretionary bonus, given at the employer's sole judgment with no prior formula, typically is not.

This matters because it means an employee's real overtime rate can be higher than "base wage × 1.5" once a qualifying bonus is factored in, and calculating overtime off base wage alone in that situation underpays the required amount.

Four mistakes that turn a routine calculation into a wage claim

Using daily hours worked instead of the weekly total, in a state where only the weekly threshold applies — this usually underpays rather than overpays, since some managers assume any single long day requires overtime when the relevant total is the whole week.

Averaging hours across two weeks to keep a week under 40 — for example, 30 hours one week and 50 the next, averaged to "40." Overtime is calculated per workweek, not averaged across a pay period, and this is one of the more common — and more clearly indefensible — shortcuts.

Excluding a non-discretionary bonus from the regular rate calculation, understating the true overtime rate owed for that pay period.

Misclassifying a role as exempt based on how it's paid rather than the actual duties test and salary threshold the exemption requires. This is the single most consequential mistake on this list, because it can mean months or years of unpaid overtime accumulating before anyone catches it.

A simple worked example

An hourly employee at $18/hour works 44 hours in a week, including a $50 non-discretionary attendance bonus for the week.

1. Base pay for 44 hours: 44 × $18 = $792
2. Regular rate including the bonus: ($792 + $50) ÷ 44 = $19.14
3. Overtime premium owed: 4 hours × ($19.14 × 0.5) = $38.28
4. Total pay: $792 + $50 + $38.28 = $880.28

Note the premium is calculated as half the regular rate, since straight-time pay for those hours is already included in the base 44-hour calculation — this is the detail that trips up manual spreadsheet formulas most often.

Keeping this from becoming a recurring headache

The rules above apply every pay period, for every non-exempt employee who works even slightly over 40 hours — which for a lot of small businesses is a regular occurrence, not an edge case. A payroll system that applies your state's actual overtime rules automatically removes the recurring risk of a manual formula silently drifting wrong, which is worth weighing against the cost of building and maintaining that formula by hand.

The short version

Overtime is 1.5 times the regular rate for hours past 40 in a week under federal law, with some states adding a daily threshold on top. The base rate for that calculation should include non-discretionary bonuses, salaried non-exempt staff are still owed overtime, and averaging hours across weeks to dodge the threshold doesn't hold up. Run any number you're unsure of through the overtime pay calculator before it goes out the door.