Overtime Rate Calculations
Calculate overtime rates accurately to ensure fair compensation and compliance with FLSA regulations.
Overtime Rate Calculations
Module goals
- Understand the difference between worked time and non-worked time for overtime calculations
- Learn how the regular rate of pay is calculated and how it determines overtime pay under the FLSA
- Recognize how multiple rates of pay or bonuses can retroactively impact overtime pay
Key takeaways
- Overtime is earned when a non-exempt employee works more than 40 hours in a workweek
- The regular rate of pay must be calculated to determine the correct overtime pay
- The regular rate may be affected by shift differentials, multiple rates of pay, or nondiscretionary bonuses
Time worked and compensable time
The FLSA requires employers to compensate employees for all hours worked, which include:
Term | Definition |
Workday | Varies by shift and start/stop times; does not need to align with calendar days |
Principal activities | Integral and indispensable tasks performed during a workday (e.g., equipment setup) |
Preliminary/postliminary | May be compensable if required by contract or regulatory guidance (e.g., gear setup) |
Donning/doffing | Compensable if required for safety or policy reasons; not compensable if for convenience |
Call-back/show-up pay | Not considered hours worked for overtime unless actual work is performed |
Waiting time | "Engaged to wait" is compensable; "waiting to be engaged" is not |
Travel time | Depends on the context; some scenarios are compensable while others are not (e.g., travel between job sites vs. regular commuting) |
Refer to examples in the full text for specific travel and waiting time scenarios.
Overtime pay calculations
Under the FLSA, overtime pay is calculated as 1.5 times the regular rate of pay for all hours worked over 40 in a workweek. The formula for regular rate of pay is:
Total compensation / total hours worked
Shift differentials
If an employee earns a shift differential, this amount must be included in the regular rate of pay for overtime purposes.
Example:
- Base rate = $10.00/hr
- Evening shift differential = $0.75/hr
- Regular rate = $10.75/hr for overtime purposes
Multiple rates of pay
When employees work at more than one rate during a workweek, use a weighted average to calculate the regular rate of pay.
Example:
- 25 hours at $9.00/hr = $225
- 20 hours at $12.50/hr = $250
- Total pay = $475
- Total hours = 45
- Regular rate = $475 / 45 = $10.56/hr
- Overtime rate = $10.56 x 1.5 = $15.84/hr
Alternative method: Use highest hourly rate for OT (e.g., $12.50 x 1.5 = $18.75) if consistently applied and more beneficial to the employee.
Nondiscretionary bonuses
Bonuses tied to performance must be factored into the regular rate of pay. If a bonus covers multiple weeks, it must be allocated evenly across those weeks.
Example:
- Quarterly bonus = $500
- Weekly bonus = $500 / 13 = $38.46
- Week worked: 44 hours @ $15.00/hr = $660
- Total weekly earnings = $660 + $38.46 = $698.46
- Regular rate = $698.46 / 44 = $15.87/hr
- Original OT paid = $15 x 1.5 = $22.50/hr
- Adjusted OT = $15.87 x 1.5 = $23.81/hr
- Difference owed for 4 OT hours = $1.31 x 4 = $5.24
Summary
Overtime pay must be calculated carefully to remain compliant with the FLSA. Employers must:
- Include all hours worked
- Use accurate regular rates of pay
- Recalculate when bonuses or mixed rates apply
Understanding and applying these calculations ensures fair compensation and reduces risk of noncompliance.
Last updated on June 7, 2025