How To Calculate Overtime Pay

Overtime pay is the extra money owed when hours worked cross a threshold set by law or by contract. The arithmetic splits the period into two bands: hours up to the threshold are paid at the base rate, and hours beyond it are paid at the base rate multiplied by a factor. With a $20 base rate, a 40-hour threshold and 45 hours worked, the week pays 40 x 20 = 800 for the standard band plus 5 x 20 x 1.5 = 150 for the overtime band, a total of 950. Almost every variation on this page is a change to one of three numbers: the threshold, the multiplier, or the base rate.

Time and a half means the multiplier is 1.5, so each overtime hour is worth one and a half times the normal hourly rate. At $20 an hour, an overtime hour is worth $30. Double time means a multiplier of 2, so the same hour is worth $40, and a few contracts or jurisdictions use it for particular days such as Sundays or public holidays. The multiplier applies only to the hours above the threshold; the standard hours inside the threshold are always paid at the plain rate, which is why the split matters more than the multiplier alone. Reading the multiplier as the whole story is the quickest way to misjudge a payslip.

The threshold is where places differ most, and it is the number people most often assume. The common weekly rule starts overtime after 40 hours in a seven-day period. Some places instead, or in addition, count daily hours and begin overtime after 8 hours in a single day, which can make a 12-hour Tuesday expensive even when the whole week stays under 40. A few apply both rules at once, so the obligation is whichever is more generous to the worker. The calculator's "hours before overtime starts" field is exactly this threshold, and it is a figure to look up rather than guess.

The counterintuitive result is that the effective hourly rate rises as overtime grows. A worker on $20 an hour who works 45 hours does not earn $20 per hour across the week; the total of 950 divided by 45 hours gives 21.1111111 per hour, which is 1.1111111 above the nominal rate. Each overtime hour drags the average upward because it is paid at a premium. Two people on the same base rate can therefore have different effective rates simply because one worked more overtime, and comparing only the headline rate hides that.

The reason the average climbs is that a high-priced band is being mixed into a low-priced one. If all 45 hours were paid at the straight $20, the week would total 900. The five overtime hours are paid 5 x 30 = 150 rather than 5 x 20 = 100, so the overtime premium is 50 for the week, and the total rises to 950. It is that 50, not the whole 150, that the higher average reflects. Keeping the premium separate from the overtime pay makes the arithmetic far easier to check.

The threshold and the multiplier can both be set by contract above the legal minimum. An employer may choose to pay time and a half after 35 hours, or double time on Sundays, or a shift differential for nights. When a contract and the law disagree, the more generous of the two usually governs, but the arithmetic is unchanged: find the threshold, find the multiplier, then split the period and price each band. Everything else is a detail about which number to use. When in doubt, run both the contract figure and the legal figure and compare the totals, because the larger one is normally the one you are owed.

Exempt and non-exempt is a legal category rather than a comment on seniority, and it decides whether the formula applies at all. In the United States, non-exempt employees are entitled to overtime under the Fair Labor Standards Act, while exempt employees — typically salaried workers in executive, administrative or professional roles who meet certain tests — are not. This page treats the distinction only as vocabulary. Whether you are exempt is a question for your contract and local law, not for arithmetic, and it should be settled before any calculation.

Salaried workers who are non-exempt are owed overtime too, and the route is a conversion. Divide the annual salary by the number of hours it represents — the conventional 2,080 is 40 hours across 52 weeks — to recover an hourly rate, then apply the same split. A $62,400 salary is $30 an hour on that basis, so a 50-hour week pays 40 x 30 = 1,200 plus 10 x 30 x 1.5 = 450, a total of 1,650. Forgetting the annual weeks when converting a monthly figure is one of the most common ways this conversion goes wrong.

Two warnings close the topic. First, rules vary widely by country, state, province and sometimes city, and thresholds, multipliers, averaging periods, rounding and exemptions all differ; nothing on this page is legal advice, and the local statute and your employment contract decide. Second, paid leave, public holidays and paid time off generally do not count toward the hours-worked threshold, because most rules count only hours actually worked. A week containing a paid holiday is still measured on the hours spent on the job.