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FLSA Overtime Pay Rules: Calculation Methods, Exemptions & Legal Standards

By SalarySteps · Updated October 18, 2026 · Editorial policy

The Fair Labor Standards Act (FLSA) generally requires covered, non-exempt employees to receive overtime after 40 hours worked in a workweek. The regular rate can include shift premiums and non-discretionary bonuses, not just base hourly pay.

Law29 U.S.C. § 207(a)(1)
Overtime rate1.5× the regular rate
Applies toHours over 40 in a workweek

The federal 40-hour workweek standard

Under Section 7(a) of the FLSA, covered non-exempt employees must receive overtime pay for all hours worked exceeding 40 hours in a single designated workweek at a rate of at least one and one-half times their regular rate of pay.

The rules that define a workweek:

Calculating the "regular rate of pay"

An overtime calculation can be wrong if it assumes the overtime rate is simply 1.5 times the base hourly wage. Under FLSA regulations (29 CFR Part 778), overtime must be calculated on the regular rate of pay, which includes all remuneration paid to the employee, with narrow exceptions.

What Must Be Included in the FLSA Regular Rate of Pay
Included in Regular Rate (Must Boost Overtime) Excluded from Regular Rate (Statutory Exclusions)
Base hourly wages & salaries Gifts and genuinely discretionary bonuses that meet the legal exclusions
Non-discretionary performance/production bonuses Irrevocable employer contributions to 401(k)/pensions
Shift differentials (night, weekend, swing shifts) Reimbursed business travel expenses (mileage, hotels)
Hazard pay & on-call compensation Paid time off when no work was performed (PTO, sick)
Sales commissions & piece-rate pay Qualifying premium portions of weekend or holiday pay (conditions apply)

Formula for the regular rate of pay:

Regular Rate = Total Non-Excludable Earnings in Workweek ÷ Total Hours Worked
Overtime Premium = Regular Rate × 0.5 × Overtime Hours
Total Weekly Pay = Total Non-Excludable Earnings + Overtime Premium

Worked examples

Scenario A: base pay with shift differential

An employee earns $22.00/hour base pay plus a $3.00/hour night shift differential for working the second shift. During the week, they work 48 hours on the night shift:

  1. Effective regular rate: $22.00 + $3.00 = $25.00/hour.
  2. Straight time for 48 hours: 48 × $25.00 = $1,200.00.
  3. Overtime premium for 8 hours: 8 × ($25.00 × 0.5) = $100.00.
  4. Total gross pay: $1,300.00 (equivalent to 40 × $25 + 8 × $37.50).

To check this example, enter $22 for 48 hours, a $3 differential on all 48 hours, and zero for the second rate and bonus in the weighted overtime calculator. It includes the differential when calculating the regular rate and half-time premium.

Scenario B: hourly wage with a non-discretionary attendance bonus

An employee earns $20.00/hour and works 50 hours in a week. They also earn a $100.00 non-discretionary attendance bonus:

  1. Straight-time hourly pay: 50 hrs × $20.00 = $1,000.00.
  2. Total compensation before overtime: $1,000.00 + $100.00 bonus = $1,100.00.
  3. True regular rate: $1,100.00 ÷ 50 hours = $22.00/hour (not $20.00!).
  4. Overtime premium: 10 overtime hours × ($22.00 × 0.5) = $110.00.
  5. Total gross pay: $1,100.00 + $110.00 = $1,210.00.

If the employer had improperly used the $20.00 base rate, the employee would have received only $1,200.00—underpaying the worker by $10.00.

State-specific overtime variations

While federal law sets the baseline, several states enforce more protective daily overtime thresholds:

Exempt vs. non-exempt classifications

To be exempt from overtime under the FLSA's white-collar exemptions (Executive, Administrative, Professional), an employee must satisfy three tests:

  1. Salary basis test: The employee must be paid a predetermined, fixed salary that cannot be reduced based on the quality or quantity of work.
  2. Salary level test: The salary must meet the federal minimum weekly threshold.
  3. Job duties test: The employee's actual job duties—not their job title—must primarily involve executive management, administrative business operations, or specialized professional knowledge requiring advanced degrees.

Job titles like "Assistant Manager" or "Lead Associate" do not make an employee exempt if their primary duties involve manual labor, customer service, or routine operational tasks.

Calculate your overtime earnings accurately with our Overtime Pay Calculator.

Sources and further reading

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