Overtime Pay Rules Under the FLSA

Overtime is one of the most valuable and most misunderstood parts of U.S. wage law. Many workers do not know whether they qualify, how the extra pay is calculated or what state law adds on top of the federal minimum. This guide explains the federal rules under the Fair Labor Standards Act (FLSA), the common ways employers get the math wrong and how overtime pay shows up in your take-home pay.

The basic federal rule

The FLSA requires covered, non-exempt employees to be paid at least one and one-half times their regular rate of pay for every hour worked over 40 in a workweek. A few points follow from that sentence:

• The workweek is the unit. It is a fixed, recurring period of 168 hours, seven consecutive 24-hour periods. It can start on any day and at any hour, and the employer sets it. Hours cannot be averaged across weeks, so 50 hours one week and 30 the next still means 10 hours of overtime in the first week.
• Federal law does not require daily overtime. Working a 12-hour day does not by itself trigger federal overtime if the total for the week is under 40.
• There is no federal cap on hours for adults (with limited exceptions), and no federal requirement for premium pay on weekends, holidays or night shifts unless a contract or state law provides it.
• Overtime must be paid on the regular payday for the pay period in which the workweek ends.
• Compensatory time in place of overtime pay is generally not allowed for private-sector employers; it is available to some public agencies.

How to calculate overtime pay

For an hourly worker earning $20 an hour who works 46 hours in a week, the calculation is simple:

Overtime example: $20/hour, 46-hour week

Item	Hours	Rate	Pay
Regular hours	40	$20.00	$800.00
Overtime hours	6	$30.00	$180.00
Gross for the week	46		$980.00

The overtime hours earn $30 an hour, which is $10 more than the base rate. That extra $10 per hour is the "premium," and it matters for the tax deduction discussed below. Use the overtime calculator to run your own numbers with different multipliers and see estimated take-home pay.

The regular rate is not always your hourly wage

The "regular rate" is a weighted average of everything you earn in the workweek that counts as pay for work, divided by the hours worked. It includes non-discretionary bonuses (such as an attendance or production bonus promised in advance), shift differentials and commissions, but excludes truly discretionary bonuses, gifts, expense reimbursements and payments for time not worked, such as vacation pay.

Suppose an employee earns $18 an hour, works 45 hours and also earns a $100 non-discretionary production bonus. The weekly total at straight time is $18 × 45 = $810 plus the $100 bonus = $910. The regular rate is $910 / 45 = $20.22. Because straight time has already been paid for all 45 hours, the employee is owed an additional half-time premium for 5 overtime hours: 0.5 × $20.22 × 5 = $50.56. That brings the total to $960.56. Employers who simply apply 1.5 times the base wage and ignore the bonus underpay overtime, which is a common source of wage claims.

Who is exempt from overtime?

Many people believe that a salaried job means no overtime. That is not what the law says. To be exempt from the FLSA’s overtime requirements, an employee generally must meet all of three tests:

1. Salary basis: paid a predetermined, fixed salary that is not reduced because of variations in quality or quantity of work.
2. Salary level: paid at least $684 per week ($35,568 a year) under the rule currently in effect. In 2024 the Department of Labor raised the threshold in two steps, but a federal court vacated that rule in November 2024, so the earlier $684 level applies.
3. Duties: the main duties must fit an exemption category, most commonly executive, administrative or professional.

The duties test is where misclassification occurs. An "assistant manager" who spends most of the day on the register and has little authority over hiring or firing is likely non-exempt regardless of the title. Highly compensated employees (total annual compensation of at least $107,432 under the rule now in effect) face a more relaxed duties test. Certain other jobs, including some computer professionals, outside sales employees and certain agricultural and transportation workers, have their own exemptions. Check the current Department of Labor fact sheets for exact language, since the details are technical.

State overtime laws

The FLSA sets a floor. States can and do require more generous overtime, and where both apply, the employee gets the more favorable one. A sample of differences:

• California: overtime after 8 hours in a day, after 40 hours in a week, and on the seventh consecutive day of work in a workweek, with double time after 12 hours in a day and for hours over 8 on the seventh day.
• Alaska and Nevada: daily overtime rules in specific circumstances (Nevada’s apply to workers earning less than 1.5 times the minimum wage).
• Colorado: overtime after 12 hours in a day or 12 consecutive hours, in addition to the 40-hour week.
• Many states set higher salary thresholds for exempt status than the federal figure, including California, Colorado, New York and Washington.

Employers are responsible for following the strictest applicable law. If you are unsure, your state labor department’s website typically has a concise guide.

How overtime is taxed

Overtime is not taxed at a higher rate, but it can feel that way for three reasons. First, it is added to the same paycheck as your regular pay, and the withholding tables annualize the total as though you earn that much every period, pushing withholding up. Second, the extra income may place part of your total income in a higher bracket. Third, overtime is subject to Social Security and Medicare like all wages. The actual tax is settled on your return, and any over-withholding comes back as a refund.

In practice, the take-home benefit of working overtime is lower than the gross premium suggests. For a single worker in Texas earning $20 an hour who works six overtime hours every week, the extra pay is $9,360 a year gross but increases take-home pay by $7,521 after taxes.

The qualified overtime deduction (2025 to 2028)

The One Big Beautiful Bill Act created a temporary federal income tax deduction for "qualified overtime compensation," covering tax years 2025 through 2028. Key features:

• It applies only to the premium portion of overtime that the FLSA requires, that is, the "half" in time-and-a-half, not the full pay for those hours.
• The maximum deduction is $12,500 per year ($25,000 for joint filers).
• It phases out for modified adjusted gross income above $150,000 ($300,000 joint).
• It reduces federal income tax only; Social Security and Medicare still apply.
• It is claimed on the tax return, and you may take it even if you do not itemize.

For the example above, the annual premium is $3,120, which could reduce federal taxable income by that amount and lower federal tax by about $374. Our overtime calculator reports the deduction separately so you can see it. Because the rules for how employers report qualified overtime on W-2s are being implemented, keep your pay records and check IRS guidance when you file.

What to do if you are not paid overtime

1. Keep records of the hours you worked, your pay stubs and your schedule, even if your employer does not keep accurate time records. The employer has the burden of recordkeeping.
2. Raise it in writing with payroll or HR. Many errors are corrected quickly.
3. File a complaint with the Department of Labor Wage and Hour Division or your state labor agency. Retaliation for asking about or reporting overtime is illegal.
4. Know the time limits. Under the FLSA, claims generally must be filed within two years of the violation, or three years if it was willful. You may be entitled to back pay plus an equal amount in liquidated damages.

Understanding the rules before a dispute, and knowing how your hours convert into annual pay (see hourly wage to annual salary), helps you plan realistically for overtime in your budget.