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What is overtime pay?
Overtime pay is the extra money you earn for working beyond your regularly scheduled working hours. It's meant to reward your extra effort and is an important aspect of many employees' compensation packages.
In the United States, workers protected by the Fair Labor Standards Act (FLSA) are entitled to overtime compensation when they work more than 40 hours in a workweek, at a rate of at least one and a half times their standard pay rates. 1
How does overtime pay work?
Here's the basic idea: If you usually earn $10 per hour, when you work overtime at time and a half, you'll get paid $15 per hour for those extra hours. Employers do this to ensure you're compensated fairly when you work longer than usual.
Let's expand the above example. We'll say that you're earning $10 per hour, and you work ten extra hours on top of your 40 regular hours in a single week. Assuming you receive time and a half for your overtime, your weekly pay might look like this:
You'll need to check your contract or ask your employer about the terms of your overtime pay. Laws about overtime pay vary in different countries and states, so make sure you know which rules apply.
Let's take a look at the most common rates of pay for overtime...
Time and a half
You'll often get a "time and a half" rate when you work standard overtime, which means your pay rate is 1.5 times your regular hourly wage. This typically happens when you work more than the standard number of hours in a day or week, often beyond 40 hours in a week in many places.
How to calculate time and a half
If you are paid by the hour, you can calculate your time and a half rate by multiplying your hourly rate by 1.5.
Let's give a simple example. Jane earns $12 per hour. When Jane gets time and a half, her hourly rate increases to $18 per hour (12 x 1.5) for the extra hours she works.
What is overtime for $15 an hour?
The standard overtime rate is 1.5 times an employee's regular hourly wage ("time and a half"). This means that if you earn $15 per hour, your time-and-a-half overtime rate will be $22.50 per hour ($15 × 1.5). If you earn double time, your overtime rate will be $30 per hour ($15 × 2).
Double overtime pay is like an extra reward for employees who put in additional hours or work on holidays (personal holidays or public holidays). The rules for double-time pay can differ depending on the job, the company, and where you live.
How to calculate double time
If you are paid by the hour, you can calculate your double pay by multiplying your hourly rate by 2.
Let's go back to our example. Jane earns $12 an hour. So, when she gets paid double time, her hourly rate increases to $24 per hour (12 x 2) for the additional hours.
Let's take a look at what the overtime entitlements are in the U.S. and how they can vary by state...
Who is entitled to overtime?
The federal government has established specific protections for employees in the United States, as stated in the framework Fair Labor Standards Act of 1938 (FLSA). This act serves as the foundation to which employers must adhere. In essence, employees who work beyond 40 hours in a single week are entitled to overtime pay.
According to federal law, overtime pay is set at a rate of one and a half times the regular wage (time and a half), although this is merely the minimum requirement. Employers have the flexibility to offer a more generous overtime rate if they choose to do so. 2
When it comes to holiday pay, there isn't any federal legislation governing it. Legally, if you work on Saturdays, Sundays, or holidays, you're not entitled to receive special compensation. With that said, it's common practice among most employers to provide additional pay on these occasions as a way to motivate and maintain the satisfaction of their workers. It's important to note that there isn't a federally mandated rate for this extra pay, however.
It's worth being aware that some employees fall under the category of exempt individuals and are, therefore, not covered by federal overtime laws. This category includes individuals earning at least double the state minimum wage, as well as those in specific licensed or certified professions. Exemptions also apply to those employed by close family members, workers in domestic service or agriculture, and long-distance truck drivers. 3
It's advisable to investigate the overtime laws of your specific state. At the federal level, overtime is primarily regulated on a weekly basis. Nevertheless, certain states and territories mandate overtime for any day in which an employee works more than 8 hours. Currently, these include Alaska, Nevada, Puerto Rico, and the Virgin Islands. 4 You can see the overtime laws for individual states listed in this handy article from Patriot Software.
Additionally, Colorado enforces overtime pay if an employee works more than 12 hours in a day, while Oregon offers time and a half for days exceeding 10 hours but exclusively in the manufacturing sector. 5 And, if you work in California, you'll become eligible for overtime when you work more than 12 hours in one day or more than eight hours on the seventh day in a week. 6
If you want to look more into your rights to overtime as an employee, here are some recommended resources for U.S. and U.K. workers:
- U.S. overtime law guidance, facts sheets (U.S. Department of Labor)
- U.K. overtime worker rights (U.K. gov)
- U.S. Department of Labor. Overtime Pay.
- U.S. Department of Labor. Overtime Pay: Wage and Hour Division.
- Legal Aid at Work. Exemptions from Overtime Pay.
- Patriot Software. Overtime Laws by State.
- Society for Human Resource Management. What States Require Overtime to be Calculated.
- State of California Department of Industrial Relations. Overtime Pay.
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