Guide To Overtime Pay

By Indeed Editorial Team

Updated February 22, 2021 | Published February 4, 2020

Updated February 22, 2021

Published February 4, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Employees who work full time are entitled to extra pay if they work for more than a 40-hour standard week. The hourly rate that they should be paid for overtime can vary depending on where they work and their employer's policy, and there are some working arrangements and professions that are exempted from overtime regulations altogether.

In this article, we explain the various types of overtime, who can claim overtime pay, how much it should be and when you might qualify.

What is overtime?

Overtime describes any hours an employee works beyond normal working hours, sometimes paid at an enhanced rate. A standard working week for most professions is considered to be 40 hours, with certain exemptions for professions where alternative arrangements are common. Overtime traditionally takes place at the end of a workday, on weekends or at any other point that an individual works for more than 40 hours in any given workweek.

In theory, there is no limit to the number of overtime hours an adult can work, but in practice, there is a point at which you will want to take a break, both to maintain a high standard of work and to incorporate a healthy amount of downtime. There are limits to the amount of overtime a child can work, meaning that you have to be 16 or over to work overtime unless the job involves hazardous duties, for which an employee must be 18 or older to work overtime.

Some specific jobs place a limit on the number of hours that an employee can work, usually when there are specific dangers to working for longer, such as truck drivers, nuclear power plant staff, pilots and marine personnel.

How much is overtime pay?

The rate of overtime you can expect will depend on what kind of work you do and which laws you are covered by. Some employees do not receive any overtime pay, as they are exempted from the regulations.

In general, employees who work on an hourly basis are not subject to any exemptions. They are covered by the Fair Labor Standards Act and will be entitled to the regulatory overtime rates if they work for more than 40 hours in any given workweek. The minimum rate at which this overtime can be paid is one and one-half times their standard hourly rate. An employee who usually earns $10 per hour will be entitled to an overtime rate of $15 per hour.

In certain situations, such as when employees are asked to work on a holiday, overtime rates are increased to double the regular hourly rate. This is usually agreed on between an employer and their staff, but it is legislated for in some states. There are no federal requirements for double pay.

Related: 6 Tips for Your Next Salary Negotiation

How to calculate overtime

Overtime pay is set at a federal level, but there are also state and municipal regulations that govern the rates at which overtime pay is calculated. When these rates differ, employers pay the one that gives the employee the highest rate. Here are 4 steps to calculating your overtime rate:

  1. Calculate your hourly rate.

  2. Find out whether you are exempt.

  3. Calculate how many hours you have worked.

  4. Check which rates apply to you.

1. Calculate your hourly rate

If you are an hourly employee, this will be the rate you are contracted for. To calculate your overtime rate as a salaried employee, you first need to find out what your hourly rate is. This is generally calculated by using 50 weeks in a year, allowing for two weeks' vacation. 50 weeks multiplied by 40 hours is 2,000 hours.

Divide your annual salary by 2,000 to find your hourly rate. For example, 30,000/2000 equals 15, so an employee who earns $30,000 per year has an hourly rate of $15.00. Standard overtime pay is time and a half, so 15 multiplied by 1.5 equals an overtime hourly pay of $22.50.

There are other ways of calculating an hourly rate, such as dividing your weekly wage by the number of hours you are expected to work, which can be helpful if you do not work a 40-hour week.

For example, if you are paid $600 per week for a 36-hour week, then your hourly rate is $16.67. This is what you would be paid for the first 40 hours worked in a week, even if you normally only work 36 hours per week. After 40 hours, your rate would increase to $25, which is $16.67 multiplied by 1.5.

Related: Salary vs. Hourly Pay: What Are the Differences?

2. Find out whether you are exempt

Salaried employees who earn over a certain amount per week in professional, administrative or creative roles may be exempt from overtime regulations. The exemption will apply if they are responsible for managing two or more employees, make independent decisions and are required to use advanced knowledge or innovative thought in the course of their job.

Certain industries and job types are exempt from the overtime regulations set out in the Fair Labor Standards Act (FLSA). These include sectors where non-standard hours are required by the nature of the job and include (but are not limited to): airline employees, casual babysitters, federal criminal investigators, local delivery drivers, taxi drivers, switchboard operators and live-in caregivers.

Employees who are not covered by the FLSA may have alternative overtime pay arrangements with their employers.

You can check your status with your employer if you are not sure whether you meet the exemption criteria, and there is plenty of information on the Department of Labor website to help you ascertain whether you should be exempt or not.

3. Calculate how many hours you have worked

Depending on your employer and your contract, you may work irregular shifts, split shifts or a combination of long and short days. It is important to keep track of the hours you work and ensure that you are logging the details and calculating your overtime so that you can check you are in agreement with your employer. If you complete a timesheet to report your hours, then keeping a copy of it can help you to monitor your working hours to check against your paycheck.

4. Check which rates apply to you

Some employers offer more than the statutory minimum overtime to their employees, and some offer double time on certain occasions. You may also be subject to state-specific municipal laws that govern the rate of overtime you are entitled to. Your contract or employee handbook should include details of the overtime rate your employer offers, and you can check the guidelines for your state and city to ensure that they are in line with the legal minimum.

Knowing the rate of overtime pay you are entitled to can help you to make important decisions about your job, so it's worth calculating whenever you move between jobs or your rate of pay changes.

Related: Base Salary and Your Benefits Package

Types of overtime

Some employers have mandatory overtime requirements, and there is no federal law prohibiting this or governing the number of hours you can be asked to work unless you are under 16. Some states impose limits on the number of hours an employee can be asked to work, and some limit the hours worked for specific types of employees. You can check any restrictions on your role with your state labor department. Common types of overtime include:

  • Time off in lieu (TOIL)

  • Voluntary overtime

  • Non-guaranteed overtime

  • 8 and 80 overtime

  • Tipped employee overtime

Time off in lieu (TOIL)

Some businesses offer staff the chance to take time off instead of paying them for overtime. The details of how this works need to be negotiated between the employer and employee, including how much time can be accrued and when it can be taken.

Voluntary overtime

This is overtime that is offered to employees and they are free to accept or decline without penalty. This is usually included in their contract.

Non-guaranteed overtime

Some businesses will not guarantee to offer overtime but will expect employees to work when there is overtime available and include this stipulation in their contracts.

8 and 80 overtime

Health care employers are sometimes eligible to use a different model for a standard workweek, known as the 8 and 80 method. Under this system, medical staff's hours worked are calculated across two weeks instead of one, and the average is used to establish whether overtime has been worked. For example, a nurse who is scheduled for six eight-hour shifts in one week would not be eligible for any overtime pay if they then work only four eight-hour shifts the following week.

This system can only be used in certain types of health care facilities and with the agreement of the employees. It makes provision for staff who work more than eight hours in a day. If any day exceeds eight hours of work, they will be eligible for overtime rates that day even if they do not exceed 80 hours over two weeks. Anyone working more than 80 hours in two weeks will be eligible for overtime pay for hours more than 80.

Tipped employee overtime

Overtime can also be calculated differently for employees that receive tips of more than $30 per week. If an employer pays below minimum wage and includes the tips earned as tip credit to make up an employee's hourly rate, then their overtime rate must reflect the minimum wage, not their cash wage. For people in this situation, the overtime rate is calculated by multiplying the minimum wage by 1.5 and subtracting the hourly tip rate.

Overtime rates can vary between cities, states and sectors. Some employees consider overtime a perk of their job, and some prefer to only work their contracted hours, so it is important to factor in an employer's overtime policy when considering a new role.

Explore more articles