Calculating Overtime Pay

Employers are required to pay employees one and one-half times their "regular rate" for all of the hours they work over 40 each workweek.

No matter how an employee is paid - hourly, by the piece, by the day, on a salary, or on a commission - the employee's compensation must be converted to an equivalent hourly rate from which the overtime rate can be calculated.

Employees Paid an Hourly Rate

The simplest calculation of the regular rate occurs when an employee is paid by the hour. The hourly rate is the regular rate. To calculate the overtime rate, you multiply the hourly rate by 1.5. Thus, an employee paid $10.00 per hour has an overtime rate of $15.00.

Employees Paid by the Piece

An employee may be paid by the piece without regardless of the actual hours worked. The regular rate is determined by totaling all of the wages paid each workweek and dividing by the total hours worked. For example, if an employee is paid $1 for each part made, the employee makes 500 parts in a workweek, and the employee works 50 hours, the employee's overtime is calculated as follows. The total wages paid ($500) divided by 50 hours equals a $10 regular rate. The employee is owed one-half times this rate ($5) for each overtime hour worked (10). The total overtime owed is $50.

Employees Paid a Day Rate

An employee may be paid for each day worked or for an entire job regardless of the actual hours worked. The regular rate is determined by totaling all of the wages paid each workweek and dividing by the total hours worked. For example, if an employee is paid $200 per day, the employee works 5 days in a workweek, and the employee works 50 hours, the employee's overtime is calculated as follows. The total wages paid ($1,000) divided by 50 hours equals a $20 regular rate. The employee is owed one-half times this rate ($10) for each overtime hour worked (10). The total overtime owed is $100.

Employees Paid a Salary

A salaried employee's regular rate of pay is computed by reference to the number of hours the salary is intended to compensate the employee. Usually this is 40 hours and the employee is entitled to one and one-half times the regular rate for each overtime hour worked.

For example, if an employee is paid a salary of $1,000 per week ($52,000 per year), and the employee works 60 hours in a workweek, the employee's overtime is calculated as follows. The weekly salary ($1,000) divided by 40 hours equals a $25 regular rate. The employee is owed one and one-half times this rate ($37.50) for each overtime hour worked (20). The total overtime owed is $750.

Employees Paid a Commission

An employee may be paid a commission regardless of the actual hours worked. The regular rate is determined by totaling all of the commissions paid each workweek and dividing by the total hours worked. For example, if an employee is paid $500 in commission in a workweek, and the employee works 50 hours, the employee's overtime is calculated as follows. The total commissions paid ($500) divided by 50 hours equals a $10 regular rate. The employee is owed one-half times this rate ($5) for each overtime hour worked (10). The total overtime owed is $50.