Learn the overtime rules, the standard 1.5x overtime formula, how to calculate pay for hourly and salaried nonexempt employees, and worked examples you can follow.
SimpleHR Team
SimpleHR
Overtime pay is simple to understand and easy to get wrong. The general idea is that nonexempt employees earn a higher rate for hours worked beyond a standard threshold. Getting the calculation right matters because overtime errors are one of the most common wage claims.
Rules differ by location
In many countries, overtime is paid at 1.5 times the regular rate of pay for hours over a weekly threshold, commonly 40 hours. The formula is:
Overtime pay = hourly rate x 1.5 x overtime hoursHere is a simple example. An employee earns 20 per hour and works 45 hours in one week. The first 40 hours pay normally, and the extra 5 are paid at overtime rate.
Regular pay = 40 x 20 = 800
Overtime rate = 20 x 1.5 = 30
Overtime pay = 5 x 30 = 150
Total = 800 + 150 = 950Overtime is not only for hourly staff. Salaried employees who are classified as nonexempt are also entitled to overtime. For them the regular rate is worked out from their salary, and overtime is paid on top of it. The exact method depends on how the pay period is structured, so get the details right for your situation.
| Employee type | Overtime applies? | How to handle |
|---|---|---|
| Hourly nonexempt | Yes | 1.5x rate for overtime hours |
| Salaried nonexempt | Yes | Calculate a rate from salary, then apply overtime |
| Exempt | Usually no | Not paid overtime under the rules |
The calculation is only as good as the hours you record. Reliable time tracking is what makes overtime accurate, especially for remote and hybrid teams. If employees declare overtime hours with a date and reason, and a manager approves them, the pay calculation starts from solid numbers.
Keep an approval trail
Overtime pay follows a simple idea: a higher rate for hours beyond a threshold. The details, thresholds, and exemptions come from the law in your area, so verify them and track hours accurately. Get the formula and the records right, and overtime stops being a source of disputes.
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