How does overtime work in the US? Employers in The United States are required to follow the Fair Labor Standards Act (FLSA) overtime requirements. This means that employees working more than a standard number of hours in a workweek are entitled to overtime pay.

While there can be differences in wage and hour laws from state to state, the Fair Labor Standards Act is a federal law establishing a minimum wage, overtime pay, and other labor standards that all US states have to follow. This can make it challenging to compute FLSA overtime pay. This guide will help you

Weekly overtime pay regulations

Eligibility for overtime: Most employees covered by the FLSA are entitled to overtime pay for hours worked beyond 40 in a workweek, except for Kansas (beyond 46 hours in a workweek) and Minnesota (beyond 48 hours in a workweek). However, employers in Kansas and Minnesota will also have to follow the federal law for:

Interstate commerce
The businesses with sales exceeding $500,000 per year
Hospitals, nursing homes, personal care assistants (PCA), community first services and support (CFSS) agencies, private and public schools, and federal, state and local government agencies.

So in most cases, all US employers will have to follow the federal overtime rules.

Employee's workweek: The weekly overtime calculation is based on the notion of the employee's workweek. This is a regularly recurring period of 168 hours or seven consecutive 24-hour periods. This is often referred to as the pay period of one week.

Overtime rate: The FLSA overtime pay rate is 1.5 times the regular hourly wage. For example, if an employee's regular hourly wage is $15, their overtime pay rate would be $22.50 per hour worked beyond 40 hours in a week.

Calculating overtime pay: Overtime pay is calculated every week, not on a daily basis. If an employee works more than 40 hours in a single week, only the hours exceeding 40 are eligible for overtime pay.

Fixed salary employees: Exempt employees who are paid on a fixed salary basis may not be eligible for overtime pay, depending on their job duties and salary level. The FLSA sets a salary threshold for employees to be considered exempt from overtime pay.

State laws: Besides federal law, many states have their own weekly and daily overtime pay laws. Some states have more generous overtime rules or lower salary thresholds for exempt status. In cases where state laws provide more favorable terms for employees, employers must follow the more beneficial regulation.

Compensatory time off: In some cases, instead of paying overtime wages, employers may offer compensatory time off (comp time) as an alternative. This allows employees to take time off later in lieu of receiving overtime pay.

Record Keeping: Employers must keep accurate records of the hours worked by employees, including overtime hours. This information is used to calculate overtime pay and ensure compliance with labor laws.

Daily overtime hours by state

In addition to weekly overtime hours worked, four US states also require computing overtime pay for each day:

Alaska: One-half times the hourly rate as overtime premium pay
after 8 hours worked
California: One-half times the hourly rate as overtime premium pay
after 8 hours worked and two times the hourly rate after 12 hours worked
Colorado: One-half times the hourly rate as overtime premium pay
after 12 hours worked
Nevada: one-half times the hourly rate as overtime premium pay after 8 hours worked

How do you calculate FLSA overtime pay?

To compute FLSA overtime pay, you need the following variables:

The regular rate of pay: This has to be in accordance with the state minimum hourly rate of pay
Weekly overtime hours worked: For most US employers, overtime accounts for hours over 40 in a workweek
Daily overtime hours worked: For Alaska, California, Colorado, and Nevada, employers also need to account for daily overtime hours worked

California example 1

As California has the most complicated formula to properly calculate overtime, let's use this as our first example to calculate overtime pay. For the sake of simplicity, we'll be using $15 as the employee's hourly regular rate of pay.

Monday: 10 hours
Tuesday: 16 hours
Wednesday: 10 hours
Thursday: 4 hours
Friday: 0 hours
Total: 40 hours worked

Calculation: [(8 x 15) + (2 x 15 x 1.5)] + [8 x 15 + (4 x 1.5 x 15) + (4 x 2 x 15)] + [(8 x 15) + (2 x 1.5 x 15)] + (4 x 15) = 840

In this example, the employee worked regular hours for one workweek. But as days were longer, they were entitled to a total pay of $840 instead of the regular weekly $600 due to daily overtime hours.

California example 2

In our second example, the Californian employee has not worked daily overtime, but as they also worked on Saturday, they are entitled to weekly overtime pay.

Monday: 8 hours
Tuesday: 8 hours
Wednesday: 8 hours
Thursday: 8 hours
Friday: 8 hours
Saturday: 8 hours
Total: 48 hours worked

In this instance, the employee is not eligible for daily overtime pay as they never exceeded 8 hours per day. But this time, the employee will receive overtime pay for weekly overtime hours:

Calculation: (15 x 40) + (15 x 1.5 x 8) = 780

While in this example, the Californian employee has worked more hours per week, they are entitled to a $780 weekly salary, in contrast to the $840 received in our first example, as they have not worked daily overtime hours.

For employers, it's important to consider that different people will have different preferences, and many will opt not to work on weekends. While FLSA overtime rules do not differentiate weekends from weekdays, some employers offer higher pay rates for weekends to invite people to work on weekends.

Texas example

As the state of Texas has not regulated daily overtime hours, only weekly overtime will be calculated.

Monday: 12 hours
Tuesday: 12 hours
Wednesday: 12 hours
Thursday: 8 hours
Friday: 0 hours
Total: 44 hours worked

Calculation: (15 x 40) + (15 x 1.5 x 4) = 690

Exempt and nonexempt employees

"Exempt" and "nonexempt" are terms used to classify employees based on their eligibility for certain protections and benefits under labor laws, including overtime pay. According to FLSA rules, exempt employees are not entitled to overtime pay, while nonexempt employees are eligible for overtime pay when they work more than a certain number of hours in a workweek.

Exempt employees are typically those who meet specific criteria related to their job duties and salary. To be considered exempt from overtime pay, an employee must satisfy both the job duties test and the salary basis test. The criteria can vary based on the specific exemption category. Here are some common exemption categories and their general requirements:

Executive Exemption: Employees in executive roles, such as managers or supervisors, are exempt from overtime pay if they primarily manage a department or subdivision, direct the work of at least two full-time employees, and have the authority to hire, fire, or make significant employment decisions.
Administrative Exemption: Employees in administrative positions are exempt if their primary duties involve non-manual work related to management or business operations, and their work requires independent judgment and discretion in matters of significance.
Professional Exemption: Professionals, including learned professionals (e.g., doctors, lawyers) and creative professionals (e.g., writers, artists), may be exempt if their work requires advanced knowledge in a field of science or learning and their work involves the regular exercise of discretion and judgment.
Computer Employee Exemption: Employees in computer-related roles, such as computer programmers and systems analysts, may be exempt if their work involves designing, developing, or analyzing computer systems and receive a certain minimum salary or hourly wage.
Outside Sales Exemption: Employees whose primary duty is making sales or obtaining orders outside of the employer's place of business may be exempt from overtime pay.
Highly Compensated Employees: This exemption applies to employees who earn a high annual compensation and perform at least one exempt duty. They may be exempt from overtime pay even if their job duties do not strictly meet the criteria of other exemption categories.

Remember that meeting the job duties criteria alone is not sufficient for exemption. Employees must also meet the salary basis test, which involves being paid a predetermined and fixed salary that meets or exceeds a specific threshold set by law. This threshold may change over time, so it's important to consult the most recent regulations.

Labor laws in each state may also have different criteria and thresholds for exemption, which could be more stringent than federal regulations. Additionally, misclassifying employees as exempt when they should be non-exempt can result in legal consequences and the requirement to pay back wages and damages to affected employees.

As labor laws can be complex and subject to change, it's always best to consult the U.S. Department of Labor or a legal professional for accurate and up-to-date information regarding exempt and non-exempt classifications.

Overtime calculator for FLSA overtime pay and state laws