How to Calculate Overtime Pay in the US — Federal Rules & State Exceptions (2026)
Overtime pay is one of the most commonly miscalculated items in small business payroll. The math itself is simple once you know the rules — but the rules vary by state, employment type, and situation in ways that trip up even experienced employers. This guide covers how to calculate overtime under the US federal standard and California's stricter daily thresholds, with worked examples you can verify with our free payroll time calculator.
The Federal Overtime Rule (FLSA)
The Fair Labor Standards Act (FLSA) requires that non-exempt employees receive overtime pay at a rate of at least 1.5 times their regular rate of pay for every hour worked beyond 40 in a single workweek. This is the baseline that applies across all 50 states.
Key definitions:
- Workweek: A fixed, regularly recurring period of 168 hours — seven consecutive 24-hour periods. The start day of the workweek is set by the employer (commonly Sunday or Monday).
- Non-exempt employee: Most hourly workers. Salaried employees earning more than $684/week ($35,568/year as of 2024) may be exempt, depending on job duties.
- Regular rate of pay: Typically the hourly rate. If an employee receives bonuses, commissions, or shift differentials, these may need to be factored into the regular rate for overtime purposes.
Federal Overtime Calculation — Step by Step
- Sum all hours worked in the workweek.
- Identify hours above 40 — these are overtime hours.
- Regular pay = 40 × hourly rate (or fewer hours if total is under 40).
- Overtime pay = overtime hours × hourly rate × 1.5.
- Gross pay = regular pay + overtime pay.
Example: 45-hour week at $22/hour (US Federal)
Regular hours: 40 · Overtime hours: 5
Regular pay: 40 × $22 = $880.00
Overtime pay: 5 × $22 × 1.5 = $165.00
Gross pay: $1,045.00
| Hours | Type | Rate | Pay |
|---|---|---|---|
| 40.00 | Regular | $22.00 | $880.00 |
| 5.00 | Overtime (1.5×) | $33.00 | $165.00 |
| 45.00 | Total | — | $1,045.00 |
California Overtime Rules — Daily Thresholds
California has the most complex overtime rules in the US. Unlike federal law, California applies overtime on a per-day basis, not just per week. Under California Labor Code:
- Hours 1–8 in a workday: regular rate
- Hours 9–12 in a workday: 1.5× (overtime)
- Hours beyond 12 in a workday: 2× (double time)
- First 8 hours on the 7th consecutive day: 1.5×
- Beyond 8 hours on the 7th consecutive day: 2×
California employees are still entitled to weekly overtime (1.5×) after 40 hours, whichever triggers first. In practice, the daily rule almost always triggers before the weekly threshold for anyone working long days.
Example: 14-hour shift at $25/hour (California)
Hours 1–8: regular · Hours 9–12: OT (1.5×) · Hours 13–14: DT (2×)
Regular: 8 × $25 = $200.00
Overtime: 4 × $37.50 = $150.00
Double time: 2 × $50.00 = $100.00
Day gross: $450.00 (vs. $350 at straight time)
States with Daily Overtime Rules (Beyond California)
Several other states have daily overtime thresholds or additional protections. If you operate in these states, verify the exact rules with your state labor board — they differ in the details.
All other states follow the federal 40-hour weekly threshold only.
Common Overtime Calculation Mistakes
- Averaging across weeks: You cannot average two weeks' hours to avoid overtime. If an employee works 50 hours in week 1 and 30 in week 2, 10 hours of overtime are owed from week 1.
- Forgetting non-discretionary bonuses: Bonuses promised in advance (production bonuses, attendance bonuses) must be included in the regular rate for OT calculation purposes.
- Misclassifying employees as exempt: The salary threshold alone doesn't determine exemption — job duties must also qualify under the FLSA white-collar exemptions.
- Rounding time incorrectly: Rounding clock-in/out times is permitted only if it averages out neutrally over time. Systematic rounding in the employer's favor is a wage theft violation.
How to Calculate Overtime for Biweekly Pay Periods
Biweekly pay covers two workweeks. Overtime is still calculated per workweek, not per pay period. Calculate each week separately, apply the threshold independently, then add the two weeks together for the paycheck total. See our detailed guide: How to calculate biweekly payroll hours.
Skip the manual math — our free calculator handles all of this automatically, including California daily OT and biweekly periods.
Try the Free Payroll Time Calculator →Frequently Asked Questions
Does overtime apply to salaried employees?
Salaried employees earning more than $684/week ($35,568/year) may be exempt from overtime under the FLSA white-collar exemptions, provided their primary job duties are executive, administrative, or professional in nature. Salaried workers below that threshold are entitled to overtime regardless of their duties. Some states have higher salary thresholds (California: $66,560/year in 2024).
Does overtime reset each week?
Yes. Overtime eligibility resets at the start of each workweek. Hours from one week cannot be carried over or averaged with another week's hours to reduce overtime liability.
Is overtime based on gross hours or scheduled hours?
Overtime is based on hours actually worked, not scheduled hours. If an employee works an extra shift voluntarily or is asked to stay late, those hours count toward the 40-hour threshold regardless of whether they were scheduled.