The 1938 Fair Labor Standards Act ensures that workers will receive compensation at 1.5 times their regular rate for hours worked in excess of 40 per week. Whether an employee is paid hourly or by salary determines how overtime is calculated. Additionally, the calculation for salaried workers varies according to the number of hours per week the salary is intended to cover.
In the examples and explanations that follow, Straight Time refers to the number of hours that an employee worked up to and including 40 hours for which he was paid his Regular Rate; Straight Time does not entitle an employee to one and a half times the Regular Rate. The hourly wage for Straight Time—non-overtime hours—is known as the Regular Rate. Overtime Hours are hours worked past 40 per week.
Consider an hourly worker who earns $10 per hour and puts in a 50-hour workweek. His Regular Rate is $10/hour. He has put in a total of 50 hours of work—40 hours of Straight Time and 10 hours of Overtime. His total take-home pay for the week, according to the formula above, is $550:
According to the FLSA, salaried employees also have the right to overtime pay. The Regular Rate is calculated by dividing the weekly salary by the number of hours it is intended to compensate as the first step in calculating overtime pay for these employees. For instance, the Regular Rate for a salaried employee working 40 hours per week and earning $400 is $10 per hour ($400/40 hours).
Consider a salaried worker who receives $400 in pay for a 40-hour workweek but puts in a 50-hour workweek. The first step is to calculate his Regular Rate. Here, the Regular Rate is $10/hour ($400/40 hours). He has put in a total of 50 hours of work—40 hours of Straight Time and 10 hours of Overtime. Using the formula above, his total weekly take-home pay is $550, which is made up of his $400 weekly salary and $150 in overtime.
Consider a salaried worker who receives $500 in pay for a 50-hour workweek and puts in 50 hours. As before, the first step is to determine the Regular Rate. Here, the Regular Rate is $10/hour ($500/50 hours). However, the salary has already covered the Overtime Hours—the hours between 40 and 50. The employee was effectively compensated $10/hour for those overtime hours. As a result, it is impossible to calculate overtime pay by multiplying the Regular Rate by 1. 5 due to the fact that the employee has already received a portion of his entitlements.
In this instance, the employee’s pay is meant to make up for a workweek that is under 40 hours. The Regular Rate is calculated in the same manner as it is for all salaried employees, but in this instance, the employee who is entitled to overtime pay must also be paid for the Straight Time he or she worked in excess of the hours in his or her workweek but fewer than 40 hours. The equation is therefore (Weekly Salary) (Regular Rate * Unpaid Straight Time) ((Regular Rate * 1 5) * Overtime Hours).
Consider a salaried worker who earns $300 in pay for a 30-hour workweek and puts in 50 hours. The Regular Rate is $10/hour ($300/30 hours). He has completed 30 hours of straight time work that is paid, 10 hours of straight time work that is unpaid (40 hours minus 30 hours), and 10 hours of overtime (50 hours minus 40 hours). His total take-home pay, calculated using the formula, is $550, which includes his $300 weekly salary plus $100 in unpaid straight time and $150 in overtime:
Who qualifies for overtime?
You must look at the Fair Labor Standards Act (FLSA) to determine who is eligible for overtime. Employees fall into one of two categories, exempt or nonexempt, in accordance with the FLSA. Heres a glance at each of these groups:
While employers must pay exempt workers on a salary basis, they are not required to do so for nonexempt workers as long as they are paid at least the minimum wage each week and receive overtime pay for any hours over the 40-hour workweek. Nonexempt workers may be paid by the hour, via a salary, or in another way.
What is overtime?
Overtime is defined as any additional hours you put in during the course of a day, week, or other period of time. Even though you get paid for working your regular hours, you get paid more for any extra hours you put in. Employees who are eligible for overtime pay must get at least 1 Upon exceeding 40 hours in a given workweek, their regular pay rate is increased by 5 times. While employers are required to pay a minimum for this, they are free to pay more if they so choose.
How is overtime pay calculated for salaried employees?
Depending on how you receive your salary, there are two methods you can use to calculate overtime pay for salaried employees. Heres a look at each method and their individual calculations:
Calculating overtime pay for a salary with fixed hours
Consider that you earn $550 per week. You plan to work 35 hours per week, but you actually work 45 hours in one week. Use the following procedures to determine your overtime pay using these fixed hours:
1. Determine your regular hourly rate
Divide your weekly earnings by the number of hours you are required to work in order to arrive at your standard hourly rate. Using the figures above, perform the following calculation:
Weekly wages / expected hours worked = regular hourly rate
$550 / 35 = $15.71
2. Calculate how much youd receive for 40 hours of work.
You can use your regular hourly rate to calculate your regular wages because overtime is only paid when you work more than 40 hours per week. You can skip this step if you are expected to work 40 hours per week because it will result in your weekly pay ($550 in this case). Using the figures above, perform the following calculation:
40 hours x regular hourly rate = total regular wages
40 x $15.71 = $628.40
Keep in mind that the hour starting point for overtime can be lowered. For instance, you can consider any hours over 35 worked as overtime. If you do this, enter that number in your calculation in place of 40.
3. Determine the overtime hourly rate
Typically, employers offer an overtime rate of 1. 5 times an employees regular pay rate. To calculate your overtime hourly rate, use the following formula:
Regular hourly rate x 1.5 = overtime hourly rate
$15.71 x 1.5 = $23.57
4. Calculate your overtime wages
Once you know your overtime hourly rate, multiply that amount by the number of additional hours you worked that particular week. Using the example above, you worked 45 hours. This indicates that you completed five more hours of work than the required minimum for overtime. For this week, figure out your overtime pay using the formula below:
Overtime hourly rate x overtime hours = total overtime wages
$23.57 x 5 = $117.85
5. Determine your total wages for that week
If you want to go one step further with your calculations, you can figure out how much money you made overall that week. To do this, add up all of your regular pay and overtime pay as shown below:
Total regular wages + total overtime wages = total wages
$628.40 + $117.85 = $746.25
Calculating overtime pay for a salary with all hours worked
Let’s say you earned $600 per week and your salary covered all of your working hours, regardless of how many you put in. Consider a scenario in which you want to determine your overtime pay for a week in which you worked 60 hours. To calculate your overtime pay in this situation, follow these steps:
1. Calculate your regular hourly rate
To begin, divide your weekly wage by the total number of hours you put in at work. Perform the following calculation:
Weekly salary / total hours worked = regular hourly rate
$600 / 60 hours = $10 per hour
2. Determine the overtime hourly rate
You can multiply the regular hourly rate by 0 because you’ve already taken into account your overtime hours. 5 instead of 1. 5 to determine your overtime hourly rate. This is what this calculation looks like:
Regular hourly rate x 0.5 = overtime hourly rate
$10 x 0.5 = $5 more for each overtime hour
3. Calculate your overtime pay
To calculate your overtime pay, multiply your overtime hourly rate by the number of overtime hours you put in. In the previous example, you worked 60 hours in a single week. Given that overtime doesn’t begin until after 40 hours, in this case, you worked 20 overtime hours. Use the following equation:
Hourly overtime pay times the number of overtime hours equals total overtime pay.
$5 x 20 overtime hours = $100 total overtime wages
4. Calculate the total amount of wages you earn
You have the option of stopping your calculation after the previous step or continuing to figure out how much money you made overall that week. To do this, add up all of your regular hourly pay and overtime pay as shown below:
Total regular wages + total overtime wages = total wages
$600 + $100 = $700
How is overtime pay calculated for hourly employees?
As an hourly worker, you only need one formula to determine your overtime pay:
Hourly pay rate x 1. 5 x number of overtime hours worked.
Consider the following illustration to get a better understanding of how this formula functions:
Suppose you had a normal pay rate of $20 per hour and worked a total of 44 hours per week. Add one to your hourly pay rate to determine your overtime pay. 5 and again by how many hours of overtime you put in (in this instance, four):
$20 x 1.5 x 4 = $120
This means you received an additional $120 in overtime pay. Divide your 40 hours (not including overtime hours) by your standard pay rate of $20 to get your total pay for the week: $800. This is how much youd receive on a standard workweek. Then, add this amount to your overtime pay as follows:
$800 + $120 = $920
How is overtime calculated for exempt employees?
Knowing how exempt employees are treated during overtime allows you to start figuring out how much pay you would get under this classification. Keep in mind that as a lower-paid exempt employee, you might be qualified for overtime. You can follow the same procedure as if you were an hourly employee to determine any overtime to which you are entitled. In other words, multiply your hourly pay rate by one to account for overtime. 5, then multiplied by the quantity of additional hours you put in.
There are two ways to account for overtime for exempt employees. Here are two examples of the calculations for each method:
Example 1:
To calculate overtime for an exempt employee using an hourly rate, follow these steps:
1. Find your hourly rate
You can calculate an employee’s hourly rate by assuming that their salary is based on 2,080 hours of work per year. Imagine you make $30,000 per year. Use the following equation to determine your hourly rate:
Hourly rate = Annual Salary x Annual Hours Worked
$30,000 / 2,080 hours = $14.42
2. Calculate your overtime pay
As an exempt worker, you can now calculate your overtime pay for a week of work using your hourly pay. Use the following equation, for instance, if you put in an extra 10 hours during a particular week:
Overtime hours x hourly rate = overtime pay
10 hours x $14.42 = $144.20
Example 2:
The steps listed below can also be used to determine our overtime pay as an exempt employee. Use the following steps for this method:
1. Divide your weekly pay by your regular hours worked
As an exempt worker, you can also calculate overtime by dividing your weekly salary by the number of regular hours you worked during that same week. As an illustration, consider getting paid $400 for a week and working 30 hours. Use the following equation:
Hourly rate = Weeks pay / Regular Hours worked in that Week.
$400 / 30 hours = $13.33
2. Calculate your overtime pay
Since overtime usually starts after 40 hours, you can calculate that if you worked 45 hours that week, you would receive $13 in compensation. 33 up until you hit the 40-hour mark. Then, you’d probably be compensated for the extra time you put in at the regular overtime rate of 1 5 times your regular rate. Since you worked five hours in excess of the 40-hour limit in this instance, you would multiply the overtime rate by your regular pay to account for the extra time worked as follows:
Regular pay x number of additional hours worked x overtime rate equals overtime pay.
1.5 x $13.33 x 5 = $99.98
3. Calculate your total pay for the week
If you want to go one step further, you can figure out your total pay for the week, including overtime, even though you can stop your calculation at the final step. To calculate your total pay, use the following equation:
Hourly rate x 40 hours = Standard pay without overtime
$13.33 x 40 hours = $533.20
Then, add your overtime pay as follows:
Standard pay plus overtime equals weekly earnings
$533.20 + $99.98 = $633.18
Therefore, you made $633. 18 that week, including both regular and overtime pay.
How to Calculate Overtime Pay
FAQ
What is the formula for calculating overtime?
The FLSA states that the formula to determine overtime pay is the nonexempt employee’s regular rate of pay multiplied by one. 5 x overtime hours worked.
How is overtime time and a half calculated?
The Fair Labor Standards Act (FLSA) contains the federal overtime provisions. Employees covered by the Act are required to receive overtime pay at a rate not less than time and a half their regular rates of pay for hours worked over 40 in a workweek, unless exempt.
How is overtime pay calculated in the Philippines 2021?
How much is time and a half? Time and a half pay is 50% more than an employee’s regular rate of pay You must pay an employee their regular rate of pay plus 50% of any overtime hours they work. Add one to the employee’s regular rate to determine their overtime rate of pay. 5.
