How overtime pay is calculated
Overtime pay has two parts: straight time for every hour worked, plus a premium on the hours that qualify. Time and a half means the qualifying hours are paid at 1.5 times the regular rate, so the premium is half the regular rate per overtime hour. Double time, which federal law never requires but many union contracts and some state laws do, pays twice the regular rate.
Worked example: an employee earns $22.00 an hour and works 46 hours in a week. The first 40 hours pay 40 times $22.00, which is $880.00. The six overtime hours pay 1.5 times $22.00, or $33.00 an hour, which is $198.00. Weekly gross is $1,078.00, and the blended effective rate across all 46 hours is $23.43. Repeated for 52 weeks that is $56,056 a year, of which $3,432 is pure overtime premium. Notice that the premium alone is half the regular rate times the overtime hours, $11.00 times 6, or $66.00 a week.
What the FLSA actually requires
The Fair Labor Standards Act requires overtime only for non-exempt employees, and only for hours worked beyond 40 in a single workweek. A workweek is any fixed, recurring period of 168 hours; it does not have to start on Monday, but once set it cannot be shifted around to avoid overtime. There is no federal requirement to pay extra for nights, weekends, holidays or for more than eight hours in a day, and averaging hours across two weeks is not allowed for most employers.
The regular rate used for overtime is not always the base hourly wage. Nondiscretionary bonuses, shift differentials, commissions and production incentives must be folded in, which raises the overtime rate. Paid time off, holidays and sick days do not count as hours worked, so a week with eight hours of holiday pay and 36 worked hours carries no overtime.
Exempt employees and state rules
Salaried workers are not automatically exempt. To be exempt from overtime an employee generally must be paid on a salary basis above a threshold and perform executive, administrative, professional, outside sales or certain computer duties. The long-standing federal salary threshold is $684 a week, which is $35,568 a year; the Department of Labor has repeatedly tried to raise it and the figure has been the subject of litigation, so confirm the current number before relying on it. Several states set higher thresholds of their own.
California is the most common exception people run into. It requires time and a half after eight hours in a day and for the first eight hours of a seventh consecutive workday, and double time after 12 hours in a day or beyond eight hours on that seventh day. Alaska, Nevada and Colorado also have daily overtime rules. Where state and federal law differ, the employee gets whichever is more generous.