What Is Overtime? Employer Guide to Overtime Pay Basics

Paying employees for extra hours sounds straightforward, until a missed calculation or a misclassified employee turns into a wage and hour violation. The Fair Labor Standards Act (FLSA) sets the federal floor for overtime pay, and many states set stricter rules on top of it. Overtime miscalculations remain one of the most common sources of wage and hour claims, which makes getting the rules right a priority for any employer with hourly or other nonexempt staff.

What Is Overtime?

Overtime is pay for hours worked beyond 40 in a single workweek, calculated at one and one-half times an employee's regular rate. The FLSA sets this federal floor, and states are free to set stricter requirements. Overtime requirements only apply to nonexempt employees, which means classification is the first decision every employer has to get right.

A workweek is a fixed, recurring period of 168 hours, and it does not have to align with the calendar week. Employers choose the workweek and must apply it consistently. Overtime calculations happen on this workweek basis regardless of whether an employee is paid weekly, biweekly, or semi-monthly.

Overtime vs. Double Time

Overtime and double time sound similar, but they’re calculated differently and required under different rules.

• Overtime is 1.5 times the regular rate, commonly called time and a half
• Double time is 2 times the regular rate

The FLSA does not require double time, though some states, including California, mandate it under specific conditions. Review your state’s double-time rules for step-by-step calculation guidance.

Who Qualifies for Overtime?

Overtime eligibility comes down to classification, not job title or pay type.

• Nonexempt Employees: Any employee who does not meet the FLSA exemption criteria must receive overtime for hours over 40 in a workweek. This includes most hourly workers and many salaried workers.
• Exempt Employees: Employees who are classifies as exempt do not qualify for overtime. They must meet all three FLSA tests: salary basis, salary level (currently $684 per week under federal rules, state and local laws may vary), and a duties test based on actual job responsibilities.
• Part-Time Status: Does not create an overtime exemption. A part-time nonexempt employee who works more than 40 hours in a workweek is entitled to overtime on the excess hours.

Getting classification right up front prevents the majority of overtime disputes before they start. Misclassification can result in back pay, penalties, and class action exposure.

Overtime Pay: The Basic Formula

The overtime formula is straightforward once regular rate and hours worked are clear.

Formula: Hours over 40 multiplied by (regular hourly rate multiplied by 1.5).

Consider an employee who earns $18 per hour and works 44 hours in a week.

Regular pay for the first 40 hours: 40 x $18 = $720.

Overtime pay for the remaining 4 hours: 4 x $27 = $108. Total pay for the week: $828.

This formula covers the basic case. For bonus pay, shift differentials, or multiple pay rate scenarios, see the time and a half article for step-by-step guidance.

State Overtime Laws

The federal overtime standard is a floor, not a ceiling, and several states raise the bar.

• Employers must apply whichever rule, federal or state, is more favorable to the employee.
• California requires overtime after 8 hours in a workday and double time after 12 hours in a workday, or on the seventh consecutive day of a workweek. Colorado, Nevada, and Alaska also apply daily overtime rules.
• Multi-state employers must apply the correct standard for each employee based on where the work is performed, not where the company is headquartered.

State rules add complexity fast, especially for businesses with employees working across multiple locations.