Overtime calculations look simple until you have overnight shifts, unpaid breaks and employees who work six days one week and three the next. This guide covers the standard US federal rule, a full weekly example and the mistakes that most often cause underpayment.
The federal rule in the US
Under the Fair Labor Standards Act, the U.S. Department of Labor explains that, unless exempt, covered employees must receive overtime pay for hours worked over 40 in a workweek at a rate of not less than time and one-half their regular rate of pay.
Key points from the same DOL page:
- The rule applies per workweek, a fixed, recurring period of 168 hours (seven consecutive 24-hour periods). It doesn't have to match the calendar week.
- Averaging hours over two or more weeks is not permitted. 50 hours one week and 30 the next is 10 hours of overtime, not zero.
- The FLSA does not require extra pay for weekends or holidays as such, unless the hours are overtime.
State laws can be stricter. Some states require daily overtime, for example. Other countries have entirely different rules. Check the law that applies to your workplace. The DOL's site links to state overtime guidance.
Step 1: calculate hours for each shift
Shift hours = End time − Start time − Unpaid break
If a shift ends after midnight, add 24 hours to the end time before subtracting.
- 08:00 → 17:30 with a 30-minute unpaid break = 9.5 − 0.5 = 9.0 hours
- 22:00 → 06:30 (overnight) with a 30-minute break = (30.5 − 22) − 0.5 = 8.0 hours
Convert minutes to decimal hours by dividing by 60: 7 h 45 min = 7.75 h, not 7.45 h. That one slip is a very common payroll error.
Step 2: total hours for the workweek
Example week for an hourly employee at $20/hour:
| Day | Shift | Unpaid break | Hours |
|---|---|---|---|
| Mon | 08:00–17:30 | 30 min | 9.0 |
| Tue | 08:00–17:30 | 30 min | 9.0 |
| Wed | 08:00–17:30 | 30 min | 9.0 |
| Thu | 08:00–17:30 | 30 min | 9.0 |
| Fri | 07:00–17:30 | 30 min | 10.0 |
| Total | 46.0 |
Step 3: split regular and overtime hours
- Regular hours = min(46, 40) = 40
- Overtime hours = 46 − 40 = 6
Step 4: calculate pay
- Regular pay = 40 × $20 = $800
- Overtime rate = $20 × 1.5 = $30/hour
- Overtime pay = 6 × $30 = $180
- Total gross pay = $980
Another way to see it: all 46 hours at straight time is $920, plus a 0.5 × $20 = $10 "premium" on each of the 6 overtime hours ($60) = $980.
Enter your own shifts, breaks, threshold and multiplier in the free overtime & shift hours calculator. It handles overnight shifts automatically.
What counts as the "regular rate"?
For overtime, the regular rate isn't always just the posted hourly wage. Under the FLSA it can include certain other payments, such as some non-discretionary bonuses or shift differentials. When those apply, the overtime premium is calculated on the higher combined rate. The rules have details and exceptions, so consult the DOL's regular-rate guidance or a payroll professional if you pay bonuses or differentials.
Night shifts and multiple workweeks
An overnight shift that crosses the end of your defined workweek can split its hours between two workweeks. If your workweek ends Sunday at midnight, a Sunday 22:00–06:30 shift puts 2 hours in one week and the rest in the next. Set the workweek start once, write it down and apply it consistently.
Common overtime mistakes
- Decimal errors: treating 7:45 as 7.45 hours.
- Averaging across pay periods: biweekly pay periods still need overtime calculated for each workweek separately.
- Forgetting short paid breaks: check which breaks count as hours worked where you are.
- Off-the-clock work: prep, closing tasks or answering messages after a shift can be hours worked.
- Assuming "salaried" means exempt: exemption depends on duties and pay tests, not just being paid a salary.
Overtime and annual pay
To see what an hourly rate means over a year, or what hourly rate a salary works out to, use the hourly to salary calculator. $20/hour at 40 hours and 52 weeks is $41,600 a year before overtime. Six hours of overtime every week would add $180 × 52 = $9,360.
Frequently asked questions
Is overtime calculated per day or per week? Under the federal FLSA it's per workweek (over 40 hours). Some states add daily overtime rules, so check the rules where your employees work.
Do paid holidays or sick days count toward the 40 hours? Under the FLSA, overtime is based on hours actually worked, so paid time off usually doesn't count toward the threshold unless a contract, policy or state law says otherwise.
How do I handle a mid-week pay rate change? When an employee works at two different rates in the same workweek, overtime usually uses a weighted-average regular rate for that week. The DOL publishes guidance on this, and payroll software handles it automatically.
Do I round clock-in times? Some employers round to the nearest 5, 10 or 15 minutes. Any rounding has to be neutral over time, so it doesn't consistently shortchange employees.
Scheduling to control overtime
Overtime isn't bad. It's often cheaper than hiring for short peaks. But unplanned overtime is a budget leak. Building the schedule with each person's weekly total visible lets you spot the 46-hour week before it happens. The Employee Shift Schedule & Payroll Hours template for Excel and Google Sheets totals weekly hours per employee, handles overnight shifts and breaks, and flags overtime automatically.
This guide is general information, not legal advice. Overtime rules vary by state and country.