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Calculate Overtime for Your Hourly and Salaried Employees

In this comprehensive guide, we'll walk you through the intricacies of calculating overtime pay for both hourly and salaried employees. Understanding overtime regulations is crucial for businesses to ensure compliance with labor laws while also effectively managing payroll costs. Whether you're an HR professional, a business owner, or an employee seeking clarity on this subject, our detailed insights will equip you with the knowledge you need.

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Hourly Employees: The Basics of Overtime Calculation

  1. Understanding Overtime Eligibility

Before diving into the calculations, it's essential to determine who qualifies for overtime pay. In most jurisdictions, hourly employees are eligible for overtime if they work more than 40 hours in a workweek. Some states have additional rules, so be sure to check your local labor laws.

  1. Calculating Overtime Hours

To calculate overtime, pay for hourly employees, follow these steps:

Step 1: Identify the total hours worked in a workweek.

Step 2: Determine regular hourly wages.

Step 3: Find the overtime rate (usually 1.5 times the regular hourly rate).

Step 4: Calculate overtime hours by subtracting 40 from the total hours worked.

Step 5: Multiply the overtime hours by the overtime rate.

Step 6: Add the regular wages and overtime pay to get the total compensation.

Let's break down the calculation further with an example:

Suppose an hourly employee works 45 hours a week at an hourly rate of $15. The overtime calculation would be as follows:

Regular wages: 40 hours x $15 = $600

Overtime hours: 45 - 40 = 5 hours

Overtime pays: 5 hours x $22.50 (1.5 x $15) = $112.50

The total compensation for the week would be $600 + $112.50 = $712.50.

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Salaried Employees: Navigating the Overtime Maze

Calculating overtime for salaried employees can be more complex due to exemptions under the Fair Labor Standards Act (FLSA). However, it's crucial to understand the rules governing salaried employees' eligibility for overtime.

  1. Exempt vs. Non-Exempt Salaried Employees

Salaried employees can be classified as exempt or non-exempt from overtime pay. Non-exempt salaried employees are entitled to overtime, while exempt employees are not. Exemptions are based on factors such as job duties, salary level, and payment basis.

  1. Overtime Calculation for Non-Exempt Salaried Employees

For non-exempt salaried employees, calculating overtime involves determining their regular hourly rate and following the same steps as for hourly employees. Here's a simplified breakdown:

Step 1: Divide the employee's weekly salary by the number of hours worked.

Step 2: Determine the regular hourly rate.

Step 3: Calculate overtime hours and pay as shown for hourly employees.

Overtime Compliance and Record-Keeping

Maintaining compliance with overtime regulations is critical to avoid legal issues. It's essential to keep accurate records of employee hours worked, rates of pay, and overtime calculations. Regular audits of your payroll practices can help ensure you're adhering to labor laws.


Navigating the intricacies of overtime pay for both hourly and salaried employees is essential for businesses. By following these guidelines and staying informed about labor laws in your jurisdiction, you can effectively calculate overtime pay, maintain compliance, and ensure fair compensation for your employees. Remember, accurate record-keeping is key to demonstrating your commitment to following the law and treating your workforce fairly.

Don't stress about calculating payroll, leave that to us. Call 909.466.7876 and a TPG Payroll & HR Specialist will help you find the payroll service that best fits your needs!

Also, Learn about The Importance of Cost-of-Living Adjustments (COLAs) in Payroll or read more about the Wage Payment Requirements in the U.S.