Complete Overtime Guide for US Employers

Overtime pay is additional compensation required when employees work beyond standard hours, typically beyond 40 hours in a workweek in the US.

Under the Fair Labor Standard Act (FLSA), employers must pay eligible employees at least 1.5 times their regular rate for these additional hours.

While the federal standard applies nationally, some states impose their own conditions, like daily overtime rates for hours worked over 8 in a day.

It is worth noting that salaried employees may also be eligible for overtime if they do not meet the criteria for exemption under the FLSA.

In the US, any hours worked beyond 40 hours in a workweek are counted as overtime under federal law.

However, state laws may vary, like California requiring employers to pay overtime for hours worked beyond eight in a single day.

Additionally, overtime pay is not federally mandated for work on weekends, holidays, or rest days, unless the total weekly hours push over the threshold. 

Under the FLSA, US employers are generally required to pay overtime at one and a half times (1.5x) the employee’s regular hourly wage for any hours worked beyond 40 in a workweek. This applies to hourly and non-exempt salaried employees.

Other types of employees, such as non-exempt salaried employees on a fluctuating workweek basis, commission-based employees paid on a workweek basis, and pieceworkers, are also entitled to overtime pay but at a different rate of 0.5 times their regular rate for hours worked over 40.

The FLSA does not mandate double time pay, though some state laws or employer policies may require it.

The FLSA classifies employees based on their job duties and salary as:

• Non-exempt from overtime compensation: Eligible for overtime pay of at least one and a half times (1.5x) their regular hourly rate for any hours worked beyond 40 in a single workweek.
• Exempt from overtime compensation: Not eligible for overtime pay regardless of how many hours they work in a week.

US employers are advised to ensure the correct classification of their employees. Misclassifying employees as exempt when they are non-exempt can lead to serious legal consequences, including fines and back pay under the FLSA.

Non-exempt employees who work over the standard hours (typically 40 hours/week) are eligible for overtime in the US.

Most US hourly employees are eligible for overtime, while some salaried employees may not be entitled to overtime (exempt) depending on duties and salary thresholds.

The FLSA outlines duties and job roles that are affirmed to be exempt (non-entitled) for overtime such as professionals, executives, and administrative employees.

However, the FLSA also affirms some positions as exceptions to exemption policies, including blue-collar roles eligible for overtime, such as construction workers, electricians, and general laborers, where their work involves practical, routine, or physical tasks rather than management or specialized knowledge.

Further specified are public safety and emergency workers, including police officers, firefighters, and EMTs, who are also considered non-exempt, as their primary focus is on public safety tasks, not management or administrative duties.

Exempt employees in the US are not eligible for overtime.

This category includes certain salaried employees who meet the exemption criteria set by the FLSA as well as those in specified job roles.

US employers are not mandated by the FLSA to pay these employees overtime and they are as follows:

• Salaried employees who earn more than $844 weekly ($43,888 annually).
• Executives managing at least two employees and are involved in hiring decisions.
• Administrators performing non-manual work related to business operations.
• Professionals requiring advanced education, like certified teachers, lawyers, and creative roles.
• Highly compensated employees earning $132,964 per year.
• Outside salespersons regularly working away from the employer’s premises.
• Certain computer professionals earning either $844 per week or $27.63 per hour.
• Employees of seasonal amusement or recreational establishments, small newspapers, and fishing operations.
• Taxi drivers, railroad employees, seamen, and some motor carrier employees
• Domestic service workers living in the employer’s residence.
• Employees of movie theaters, recreational establishments, and farms using less than 500-man days of labor per quarter.
• Certain commissioned employees in retail or service establishments.
• Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations.
• Employees in hospitals and residential care facilities who may work a 14-day period with overtime after 8 hours in a day or 80 hours in the 14-day period.
• Public agency employees, such as fire departments and police departments, who have flexible work periods ranging from 7 to 28 days.
• Employees engaged in certain operations on agricultural commodities and bulk petroleum distributors who have partial overtime exemptions.
• Workers receiving remedial education who may be required to spend up to 10 hours per week in training without receiving overtime, as long as they are paid their normal wages for those hours.

US employers can calculate overtime pay for different types of employees as follows:

• Hourly Employees: For hourly workers, overtime is calculated at one and a half times (1.5x) their regular rate of pay for any hours over 40 in a workweek.

For instance, if an employee earns $15 per hour, their overtime rate would be $22.50 ($15 x 1.5).

If the employee works 45 hours in a week, their overtime hours would be five, and they would earn $22.50 per hour for those overtime hours.

So, their total overtime pay for the week would be $112.50 ($22.50 x 5 hours).

• Salaried Employees: For eligible salaried employees, overtime is also calculated at 1.5x their regular rate of pay for hours over 40 in a workweek.

First, such employees must determine their regular hourly rate by dividing their weekly salary by 40 hours.

For example, if an employee earns $840 per week, their regular rate of pay would be $21 ($840 ÷ 40 hours).

If their regular rate is $21, their overtime rate would be $31.50 per hour ($21 x 1.5).

So, if the employee works 50 hours, their overtime hours would be 10, resulting in a total overtime pay of $315 ($31.50 x 10 hours).

• Piece Rate Employees: For piece rate employees, overtime is calculated at half the regular hourly rate (0.5x) for any hours worked over 40 in a workweek.

Employees must start by finding their regular rate of pay by dividing the total weekly earnings by hours worked.

For example, if an employee earns $600 in a 50-hour workweek, their regular rate of pay would be $12 per hour ($600 ÷ 50 hours).

At half this rate, their overtime rate would be $6 per hour ($12 x 0.5).

For the 50 hours in a workweek, their overtime hours would be 10.

So, their total overtime pay for the week would be $60 ($6 x 10 hours).

• Commission-Based Employees: For commission-based employees paid on a workweek basis, overtime is also calculated at half the regular rate (0.5x) for hours over 40.

Employees must start by counting their total weekly earnings by combining their base pay with commissions.

For example, if an employee earns $500 in base pay and receives an additional $300 in commissions, their total weekly earnings would be $800.

The total weekly earning is then divided by the total hours worked in a week to find their regular hourly rate.

If the employee works 45 hours, their regular rate of pay would be $17.78 ($800 ÷ 45 hours).

At half this rate, the overtime rate would be $8.89 per hour ($17.78 x 0.5).

Since the employee worked 45 hours, their overtime hours would be five.

With five overtime hours, their total overtime pay for the week would be $44.45 ($8.89 x 5 hours).

For more guidance, see our How to Calculate Overtime Pay. 

Overtime in the US must be paid on the regular payday for the period it was earned.

However, employers should also review state-specific requirements regarding paychecks, as some states have additional or unique rules. 

Not all businesses in the US are required to pay overtime.

Certain exemptions allow specific businesses to avoid paying overtime if they meet particular conditions. These entities include:

• Retail or service businesses: are exempt if over half of their sales are within the same state, annual sales are less than $250,000, and they do not provide laundry, cleaning, or clothes repair services, nor operate as a hospital, school, or similar institution.
• Certain retail businesses: that make or process their goods on-site are exempt from overtime if 85% of their sales are within the same state.
• Small businesses handling telegraph messages: may qualify if their telegraph revenue is under $500 per month.
• Businesses primarily involved in preparing or serving food and drinks: are exempt from paying overtime, though they must still meet minimum wage requirements.

In addition, there are other types of establishments in the US that have special exceptions or exemptions from paying overtime to their employees, such as hotels, motels, lodging businesses, and seasonal or recreational establishments.

Overtime in the US is mainly governed by the Fair Labor Standards Act (FLSA), which was enacted in 1938.

The FLSA sets rules for overtime pay, minimum wage, recordkeeping, and child labor protections for both full-time and part-time workers across most industries.

However, individual states in the US may have their own overtime regulations that employers also need to comply with.

US overtime laws are enforced by the Department of Labor’s Wage and Hour Division (WHD).

The WHD is responsible for making sure US employers in all industries comply with laws related to wages, such as overtime pay, minimum wage, and child labor rules.

The WHD also offers guidance on worker rights, helping resolve disputes and ensuring compliance with federal regulations.

If employees believe their rights have been violated, they can file a complaint with the WHD.

After a complaint is filed, the WHD will investigate the employer’s practices. If violations are found, back pay in the US may be required, along with corrective actions for compliance.

US employers who willfully or repeatedly fail to meet overtime pay requirements may face civil penalties of up to $1,100 for each violation.

For intentional violations, employers can face legal consequences, including fines of up to $10,000 for the first offense.

Repeat offenders may face jail time of up to six months.

To comply with overtime laws, US employers need to have clear, straightforward policies on overtime eligibility, pay rates, and approval procedures.

Frequent policy reviews and communication help employees understand their rights and obligations.

Using tools, like an overtime tracker or time and attendance software, can also make it easier for US employers to monitor work hours and maintain accurate records, which reduces the risk of compliance issues.