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What is Overtime?

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Moving Beyond the 40-Hour Week

The term "overtime" does double duty. It means both the amount of time an employee stays on the job beyond normal working hours and also the pay received for this extra time. Federal overtime laws are found in the Fair Labor Standards Act, but states have their own laws on the subject.

What Is Overtime Definition?

Overtime means pretty much what it sounds like. When an employee works hours over and above the normal work week, he is considered to have worked overtime. It also describes the extra money the employee earns for putting in that extra time.

What Is Overtime Hours?

Under the Fair Labor Standards Act (FLSA), overtime hours are hours an employee works above 40 hours a week. Note that under federal law, working weekends or nights doesn't necessarily mandate extra pay. This is a matter of contract between the employee and employer.

Overtime Pay

The amount of money an employee makes for working overtime can be called overtime or overtime pay. Under the FLSA, the employer must pay the employee a rate that is at least time and one-half their regular rate of pay, which may be calculated to include bonus payments. The Act does not mandate time and a half pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless these are above the normal 40-hour work week.

What Is Overtime Pay?

Under the FLSA, overtime is calculated on a weekly basis. Each employee's workweek is a period of 168 hours, seven consecutive 24-hour days, but it doesn't necessarily start on a Monday. It doesn't have to line up with the calendar week, but can start on any day and at any hour. However, the employer cannot average work hours over two or more weeks. Instead, overtime pay is calculated workweek by workweek. The employer must pay all overtime earned in a particular workweek on the regular pay day.

What Is Overtime Premium?

The overtime premium is the extra pay an employee gets for working overtime. For example, under the FLSA, the overtime premium is the difference between the time and a half that the employee earns for one hour of overtime and the amount she usually earns for a normal hour of work. That comes to a 50 percent premium. For example, if an employee earns $20 an hour for regular hours, her overtime wage would be $30 an hour. The extra $10 would be the overtime premium.

How Do You Calculate Overtime?

Overtime is calculated by workweek. An employee's workweek starts and ends on a particular day of the week at a particular hour. She is paid at normal rate for the first 40 hours worked that week, then earns time and a half for every hour worked beyond that during the workweek.

To determine your overtime premium, first calculate your regular rate of pay. Be sure to include all compensation you get for your work, including wages, commissions, performance-based bonuses and shift differentials. Gifts and perks like parking are not included. Once you figure the normal rate of pay, you add the 50 percent premium for every overtime hour.

State Variances

States have their own overtime laws that can give the employee greater benefits than federal overtime laws. If an employee works in a state with an overtime law, she gets overtime based on whichever law, state or federal, benefits her most. For example, some states, like California, mandate that overtime be calculated on a daily basis as any hours an employee works over eight hours in a day. Employees in these states are entitled to get daily overtime, but also weekly overtime under the federal law.

State laws are different from the FLSA in several ways. They can cover small and local companies, while the FLSA applies only to larger companies. They may include more employees than the FLSA. That law exempts several categories of employees that a state may not exempt. And, as mentioned, states can require overtime on a daily basis or after a different number of hours worked.