Calculating Overtime Pay

By Joy Lynn Hyer, SPHR, SHRM-SCP, CCP, Senior Compensation/Survey Analyst
Published February 13, 2024

The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees not only minimum wage, but also overtime pay for all hours in excess of 40 in a workweek. The overtime premium is not less than one and one-half times an employee’s “regular rate” of pay per hour. Under the FLSA, the regular rate includes “all remuneration for employment paid to, or on behalf of, the employee.” 

Overtime pay is calculated based only on payments to an employee that are required to be included in the regular rate of pay. An extensive list of exclusions from the regular rate may be found in the regulations.

The following steps from the DOL Fact Sheet #56C: Bonuses under the Fair Labor Standards Act (FLSA) can be used to calculate the regular rate of pay and overtime compensation due when an employee is paid an hourly rate.

Step 1:
Total compensation for the week (minus any statutory exclusions) ÷ Total hours worked in the week = Regular Rate per hour for the week (must be at least the current minimum wage)
$748.00 / 44 hours = $17.00/hour

Step 2:
Regular Rate x (.5) = Half-time premium for each overtime hour (note the straight time for the overtime hours is included in Step 1)
$17.00 x (.5) = $8.50

Step 3:
Half-time premium pay rate x Overtime hours = Overtime compensation due
$8.50 x 4 hours = $34.00

Step 4:
Total Compensation + Overtime compensation = Total amount due to employee
$748.00 + $34.00 = $782.00

Example A: Nondiscretionary bonus
A non-exempt employee is paid $10.00 per hour and receives a $50.00 bonus in a particular week for helping to produce a special order for a customer two weeks earlier than previously scheduled. The employee worked 43 hours that week. Here’s how to compute overtime pay based on the employee’s regular rate:

$10.00 per hour x 43 hours = $430.00 (total compensation for straight time)
$430.00 + $50.00 (bonus) = $480.00 (total compensation)
$480.00 ÷ 43 hours = $11.16 (regular rate)
$11.16 x .5 = $5.58 (half time premium pay rate)
$5.58 x 3 overtime hours = $16.74 (overtime pay due)
$480.00 + $16.74 = $496.74. (total due)

Example B: Shift differential plus nondiscretionary bonus
A non-exempt employee is paid $15.00 per hour plus an evening shift differential of $1.00 per hour for all hours worked during an evening shift. The employee worked 45 hours, 30 of which were during evening shifts, in a week. The employee also earned a $100.00 bonus that week for helping to produce a special order for a customer two weeks earlier than previously scheduled. 

$15 per hour x 45 hours = $675 (compensation for straight time at $15/hour)
$1.00 x 30 hours = $30 (shift differential for the evening shifts)
$675 + $30 (shift differential) + $100 (bonus) = $805 (total compensation)
$805 ÷ 45 = $17.89 (regular rate)
$17.89 x .5 = $8.95 (half time premium pay rate)
$8.95 x 5 overtime hours = $44.75 (overtime pay due)
$805 + $44.75 = $849.75 (total due)

Example C: Nondiscretionary bonus and an excludable discretionary bonus
A non-exempt employee is paid $10.00 per hour and receives a $50.00 bonus in a particular week for helping to produce a special order for a customer two weeks earlier than previously scheduled. The employee also receives a $25.00 on-the-spot bonus that week (because it was not preannounced to the employee, it is an excludable discretionary bonus). The employee worked 43 hours that week.

$10.00 per hour x 43 hours = $430.00 (total compensation for straight time)
$430.00 + $50.00 (excludes $25.00 discretionary bonus) = $480.00 (total compensation)
$480.00 ÷ 43 hours = $11.16 (regular rate)
$11.16 x .5 = $5.58 (half time premium pay rate)
$5.58 x 3 overtime hours = $16.74 (overtime pay due)
$480.00 + $16.74 + $25.00 (discretionary bonus) = $521.74 (total due)

Other FLSA considerations:

• Overtime pay is not required for work done on a Saturday, Sunday, or holiday under the FLSA, unless the employee worked more than 40 hours in that week.
• Overtime earned in any workweek must be paid on the regular pay day for the pay period in which the wages were earned. 
• A regular rate of pay cannot be less than minimum wage.
• A lump sum paid for work performed during overtime hours, regardless of the number of overtime hours worked, does not qualify as an overtime premium.

Overtime pay may not be waived by any employer/employee agreement.

The DOL offers the helpful fact sheet #56A Overview of the Regular Rate of Pay Under the Fair Labor Standards Act (FLSA) for more information on what types of payments can be excluded from this calculation.

HR Source members seeking more information about calculating the regular rate of pay can contact us at the HR Hotline Online or at 800-448-4584.