How do you calculate overtime pay?

The Fair Labor Standards Act, passed in 1938, guarantees employees compensation at one and a half times their regular rate for hours worked above 40 hours per week. How overtime is calculated depends on whether the employee is paid hourly or by salary. Further, the calculation for salaried employees differs depending on the number of hours per week the salary is meant to compensate for.

In the examples and explanations below, Straight Time is the amount of hours the employee worked up to 40 hours for which he is paid his Regular Rate—an employee does not get one and half times the Regular Rate for Straight Time. The Regular Rate is the hourly payment for Straight Time—non-overtime hours. Overtime Hours are hours worked past 40 per week.

The easiest calculation for overtime pay involves hourly employees. The formula can be expressed as (Regular Rate * Straight Time) + ((Regular Rate *1.5) * Overtime Hours).

Take, for example, an hourly employee who is paid $10/hour and works a 50-hour week. His Regular Rate is $10/hour. He has worked 40 hours of Straight Time and 10 hours of Overtime (50 hours minus 40 hours). Applying the formula above, his total take-home pay for the week is $550:

(Regular Rate * Straight Time) + ((Regular Rate * 1.5) * Overtime Hours)

($10/hour * 40 hours) + (($10/hour * 1.5) * 10 hours)

$400 + ($15/hour * 10 hours)

$400 + $150

$550

Salaried employees are also entitled to overtime pay under the FLSA. The first step in calculating overtime pay for these employees is to determine the Regular Rate by diving the weekly salary by the number of hours it is intended to compensate. So, for example, the Regular Rate for a salaried employee who makes $400 for a 40-hour week is $10/hour ($400/40 hours).

However, the next step differs depending on whether the salary is for a fixed workweek of 40 hours, a fixed workweek of more than 40 hours, or a fixed workweek of less than 40 hours.

In this case, the employee’s salary is intended to compensate for a 40-hour workweek. Here, the calculation is similar to that for hourly employees and its formula can be expressed as (Weekly Salary) + ((Regular Rate * 1.5) * Overtime Hours).

Take, for example, a salaried employee who is paid $400 in salary for a 40-hour workweek and works a 50-hour week. The first step is to calculate his Regular Rate. Here, the Regular Rate is $10/hour ($400/40 hours). He has worked 40 hours of Straight Time and 10 hours of Overtime (50 hours minus 40 hours). Applying the formula above, his total take-home pay for the week is $550—that is, the $400 weekly salary plus $150 of Overtime:

(Weekly Salary) + ((Regular Rate * 1.5) * Overtime Hours)

$400 + (($10/hour * 1.5) * 10 hours)

$400 + ($15/hour * 10 hours)

$400 + $150

$550

In this case, the employee’s salary is intended to compensate for a workweek greater than 40 hours. The calculation is different here because any overtime hours are already partially compensated for by the weekly salary.

Take, for example, a salaried employee who is paid $500 in salary for a 50-hour workweek and works a 50-hour week. The first step, as before, is to calculate the Regular Rate. Here, the Regular Rate is $10/hour ($500/50 hours). However, the Overtime Hours—the hours between 40 and 50—have already been compensated by the salary. In effect, the employee has been paid $10/hour for those Overtime Hours. Thus, in calculating the overtime pay cannot be calculated by multiplying the Regular Rate by 1.5 because the employee has already received part of what he is entitled to.

However, the employee has still been underpaid with respect to those Overtime Hours—he should have received $15/hour instead of $10/hour. Thus, in the calculation, Overtime Hours should be multiplied by one-half the Regular Rate, resulting in the following formula:

(Weekly Salary) + ((Regular Rate * .5) * Overtime Hours Between 40 and 50)

Applying the formula, the employee’s total take-home pay for the week is $550—that is, the $500 in weekly salary plus $50 in overtime pay:

(Weekly Salary) + ((Regular Rate * .5) * Overtime Hours Between 40 and 50)

$500 + (($10/hour * .5) * 10 hours)

$500 + ($5/hour * 10 hours)

$500 + $50

$550

However, in the above scenario, the employee’s salary was for a 50-hour workweek and that is what the employee worked. What is the calculation when that same employee works more than 50 hours—say, 55 hours?

In that case, the employee is entitled to receive compensation at 1.5 times the Regular Rate for hours worked past 50 hours. The formula can be expressed as follows:

(Weekly Salary) + ((Regular Rate * .5) * Overtime Hours Between 40 and 50) + ((Regular Rate * 1.5) * Overtime Hours Past 50 Hours)

$500 + (($10/hour * .5) * 10 hours) + (($10/hour * 1.5) * 5 hours)

$500 + ($5/hours * 10 hours) + ($15/hour * 5 hours)

$500 + $50 + $75

$625

In this case, the employee’s salary is intended to compensate for a workweek less than 40 hours. While, as with all salaried employees, the Regular Rate is calculated the same way, here the employee who is entitled to overtime pay must also be compensated for the Straight Time he worked above the hours of his workweek but below 40 hours. Thus, the formula is (Weekly Salary) + (Regular Rate * Unpaid Straight Time) + ((Regular Rate * 1.5) * Overtime Hours).

Take, for example, a salaried employee who is paid $300 in salary for a 30-hour workweek and works 50 hours. The Regular Rate is $10/hour ($300/30 hours). He has worked 30 hours of Paid Straight Time, 10 hours of Unpaid Straight Time (40 hours minus 30 hours), and 10 hours of Overtime (50 hours minus 40 hours). Applying the formula, his total take-home pay is $550—that is, the $300 in weekly salary plus $100 of unpaid straight time plus $150 of overtime:

(Weekly Salary) + (Regular Rate * Unpaid Straight Time) + ((Regular Rate * 1.5) * Overtime Hours)

$300 + ($10/hour * 10 hours) + (($10/hour * 1.5) * 10 hours)

$300 + $100 + ($15/hour * 10 hours)

$300 + $100 + $150

$550

For employees with fluctuating workweeks, the weekly salary serves as compensation for all hours worked during the week whether that is 20, 40, or 50 hours. Thus, the Regular Rate increases or decreases based on how many hours an employee works in any given week.