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What is overtime?

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1 minutes

Overtime refers to the hours worked by an employee that exceed their standard work schedule, typically over 40 hours per week, for which they are compensated at a higher pay rate. This additional pay rate is often one and one-half times the regular hourly wage, known as "time and a half."

What are overtime hours?

Overtime hours refer to any hours worked by an employee beyond their standard work schedule. In most cases, this is defined as working more than 40 hours in a single workweek. Some industries or employers might have different thresholds for overtime, such as daily overtime for working more than 8 hours in a day, depending on local labor laws and company policies.

What is overtime pay?

Overtime pay is the additional compensation qualifying employees receive for working overtime hours. The Fair Labor Standards Act (FLSA) is an American law that mandates that non-exempt employees must be paid at least one and a half times their regular hourly rate for any hours worked over 40 in a workweek. This higher rate is commonly referred to as "time and a half."

Who is eligible for overtime pay?

Eligibility for overtime pay depends on the employee's classification under overtime laws, most notably the FLSA.

Exempt employees

Exempt employees are typically not eligible for overtime pay (or minimum wage). These employees fall into categories such as executive, administrative, professional, outside sales, and certain computer employees. To qualify as exempt, these employees must meet specific criteria regarding their job duties and receive a salary that meets or exceeds a certain threshold set by the Department of Labor. The FLSA also doesn’t require agricultural workers to receive overtime pay.

Non-exempt employees

Non-exempt employees are eligible for overtime pay. These employees are usually paid on an hourly basis and do not meet the exemption criteria. Non-exempt employees must receive overtime pay at a rate of at least one and a half times their regular hourly wage for any hours worked over 40 in a workweek.

Independent contractors

Independent contractors are not eligible for overtime pay under the FLSA. They are considered self-employed and are typically paid per project or assignment rather than by the hour. As such, they are responsible for negotiating their rates and managing their work hours.

How to calculate overtime pay

Calculating overtime pay is usually pretty straightforward:

  1. Determine the employee’s regular rate of pay: Identify the employee's regular hourly wage. For salaried employees, divide their weekly salary by the number of hours they are expected to work per week (typically 40 hours).
  2. Calculate the overtime rate: Multiply the regular hourly rate by 1.5 to find the overtime rate. For example, if the regular hourly rate is $20, the overtime rate would be $20x1.5, or $30.
  3. Calculate how many overtime hours the employee worked: Determine the number of hours of overtime worked. This is the total hours worked in the week minus 40 hours.
  4. Calculate the employee’s overtime pay: Multiply the overtime hours by the overtime rate. For example, if an employee worked 45 hours in a week with a regular hourly rate of $20, the calculation would be:
    • Overtime hours = 45-40 = 5 hours
    • Overtime pay = 5 hours x $30 (overtime rate) = $150
  5. Calculate the employee’s total pay: Add the regular pay and the overtime pay. For the example above:
    • Regular pay = 40 hours x $20 (regular pay rate) = $800
    • Overtime pay = $150
    • Total pay = $800 + $150 = $950

State laws regarding overtime

While the FLSA covers all of America, states have made their own laws to increase protections or make more specific rules about who is eligible for overtime pay and when.

California has the strictest overtime laws, requiring employers to pay double an employee’s regular pay rate if they work more than 12 hours in a day or more than eight hours on their seventh consecutive day of work.

These states have daily overtime rules:

  • Alaska: 1.5 times the regular pay rate if an employee works more than eight hours in a day.
  • California: 1.5 times the regular pay rate if an employee works more than eight hours in a day.
  • Colorado: 1.5 times the regular pay rate if an employee works more than 12 hours in a day or 12 consecutive hours.
  • Florida: Overtime pay is required for manual laborers who work more than 10 hours in a day.
  • Nevada: 1.5 times the regular pay rate if an employee works more than eight hours in a day and earns less than 1.5 times the minimum wage.
  • Oregon: 1.5 times the regular pay rate if an employee works more than 10 hours a day in mill, factory, or manufacturing jobs, or eight hours a day in timber jobs.

Frequently asked questions about overtime

What counts as overtime hours?

Overtime hours typically refer to any hours worked beyond the standard 40-hour workweek. However, some states or employers may have different thresholds, such as requiring overtime pay for hours worked over 8 in a single day. It’s important to check local labor laws and company policies for specific definitions of overtime hours.

Are salaried employees eligible for overtime pay?

Not all salaried employees are exempt from overtime. Eligibility depends on the specific job duties and salary level. Exempt employees, such as those in executive, administrative, or professional roles, generally don’t qualify for overtime pay. 

How do nondiscretionary bonuses affect overtime pay?

Nondiscretionary bonuses are bonuses that are promised or expected as part of an employee’s compensation. These bonuses are included in the calculation of the regular rate of pay, but under the FLSA, they don’t count toward determining overtime pay.

Do part-time employees receive overtime pay?

Part-time employees are entitled to overtime pay if they work more than 40 hours in a workweek. The same rules that apply to full-time employees also apply to part-time employees regarding overtime eligibility and compensation.

Where can employers and employees learn more about overtime laws?

The Department of Labor (dol.gov) has multiple fact sheets available about overtime and overtime pay.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.

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