How Overtime Pay Works in the US: Rules, Examples and Taxes
Overtime looks simple from the outside: work extra hours, earn extra money. But ask a room of employees how it's calculated and you'll get a lot of different answers. Who qualifies? Does a bonus count? Why does the extra money seem to shrink on the pay stub? Here's a clear walk-through with real numbers.
The federal rule in plain words
Under the Fair Labor Standards Act (FLSA), most hourly employees are "non-exempt." For every hour worked beyond 40 in a single workweek, they must be paid at least 1.5 times their regular rate. A workweek is a fixed, repeating 168-hour period (seven days in a row). Your employer can choose when it starts, but it can't average two weeks together to avoid overtime. Working 50 hours one week and 30 the next still means 10 overtime hours in the first.
Example 1: the simple case
You earn $25 an hour and work 46 hours. The first 40 hours pay 40 × $25 = $1,000. The 6 overtime hours pay at $37.50, which is $225. Your gross pay for the week is $1,225. Plug in your own figures with the overtime calculator.
Example 2: when a bonus is involved
The regular rate isn't always the number on your offer letter. Non-discretionary bonuses, such as a production or attendance bonus promised in advance, and shift differentials must usually be included. Suppose you earn $20 an hour, work 45 hours and also receive a $50 attendance bonus.
First, add up all pay for the week at straight time plus the bonus: 45 × $20 = $900, plus $50, equals $950. The regular rate is $950 ÷ 45 hours = $21.11. You've already been paid straight time for all 45 hours, so you're owed an extra half-time for the 5 overtime hours: 0.5 × $21.11 × 5 = $52.78. The total for the week is $1,002.78. Many payroll mistakes happen exactly here, so it's worth checking if you get regular bonuses.
What does not count as hours
Only hours actually worked count toward the 40. Paid vacation, sick days and holidays generally don't, even if you're paid for them. If you worked 36 hours and took one paid holiday of 8 hours, you have not reached overtime.
Salaried doesn't always mean exempt
People often assume a salary means no overtime. Not so. To be exempt, an employee generally must earn at least a minimum salary (federal level: $684 a week, or $35,568 a year) and mainly perform executive, administrative or professional duties. Job titles don't decide it, duties do. If your title says "manager" but most of your day is spent on routine tasks, you may still be owed overtime. Check with your state labor department or the US Department of Labor if you're unsure.
State rules can be stricter
Federal law has no daily overtime, but several states do. California, for instance, requires overtime after 8 hours in a day and double time after 12. Some states set higher salary thresholds for exemption. When federal and state laws differ, the rule that favors the worker applies. If you want a view of how pay is built, see salary vs hourly pay.
How overtime is taxed
Overtime is ordinary wages. It's added to your gross pay, then federal income tax, Social Security and Medicare are applied. For a worker in the 22% bracket, that's about 29.65% when you include payroll tax, so $225 of overtime pay might leave about $158. The paycheck can look unusually heavily withheld because the system treats a big check as if it repeats all year, but the final tax is settled when you file. Marginal tax rate explained shows why.
There's also a newer federal deduction for qualified overtime pay, aimed at the premium part of the pay (the "half" in time-and-a-half), which has caps and income limits and applies for a limited set of years. It's claimed when you file, not through your paycheck. Check the current IRS guidance for exact rules.
Example 3: seeing what you really keep
Let's say you earn $22 an hour and work 48 hours. Regular pay is 40 × $22 = $880. Overtime is 8 hours at $33, which is $264. Your gross for the week is $1,144. Now look at the overtime slice on its own. If your marginal federal rate is 22%, add 7.65% for Social Security and Medicare, and the combined rate is about 29.65%. Of that $264, you keep roughly $186. It's still a good return on the extra eight hours, just not the full amount you see on the stub.
What counts as working time
Many overtime disputes aren't about the rate at all but about which minutes count. Generally, time you're required to work is paid time, even when nobody calls it work. That includes required training, tasks done before clocking in, answering work calls or messages after hours when you're expected to, and travel between job sites during the day. Short breaks of around twenty minutes or less are usually paid. Meal breaks can be unpaid only if you're fully relieved of duty. If you eat lunch at your desk and answer questions, that time may count.
Two jobs and overtime
Overtime is calculated per employer. If you work 30 hours at one company and 25 at another, you don't have 55 overtime hours, because the hours aren't combined across unrelated employers. But if both jobs are with the same employer, or closely connected employers, the hours may be added together. Always check which entity is paying you.
Tipped workers
Tipped employees are covered too. Overtime for them is based on the full minimum wage, not just the lower cash wage, and the employer pays the difference after counting the allowed tip credit. If you work in a restaurant and regularly log more than 40 hours, make sure your stub shows overtime hours separately.
Red flags worth checking
- You're paid a flat amount per day or per job but work long hours. A flat rate doesn't cancel overtime for a non-exempt worker.
- Your hours on the stub are always exactly 40 although you work more.
- You're asked to clock out and keep working.
- Your employer offers time off later in place of overtime pay. In the private sector, that's generally not allowed.
Is overtime worth it?
Often yes, because you keep most of each extra dollar. But subtract extra costs such as childcare, fuel or takeout meals. Run your numbers with the pay raise calculator or the US paycheck calculator.
If you think you're owed overtime
- Keep your own record of hours worked and pay stubs.
- Raise it politely with payroll or HR first. Many errors are honest ones.
- If that doesn't resolve it, contact your state labor office or the Wage and Hour Division of the US Department of Labor.
Claims generally have a time limit, commonly two years, or three if the violation was willful, so don't wait too long.
Common questions
Can my employer give me time off instead of overtime pay? For most private-sector workers, no. Comp time in place of pay is generally not allowed.
Can I refuse overtime? That depends on your contract and state law. Employers can often require it.
Where is overtime on my stub? It's a separate earnings line. How to read a pay stub explains the layout.
Written by Muhammad Tabish. Federal rules as of October 2026; confirm details with the US Department of Labor and your state. Not legal advice.