Overtime pay is compensation for hours worked beyond the standard workweek. Understanding how overtime works — who qualifies, how it's calculated, and how it affects your annual income — is important for any hourly or salaried employee.
What is overtime pay?
Overtime pay is a premium rate paid for hours worked above the standard threshold (typically 40 hours per week in the US, 48 hours in many European countries). The most common overtime rate is 1.5× (time and a half) the regular hourly rate.
US overtime rules
Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive overtime pay at 1.5× their regular rate for all hours over 40 in a workweek. Exempt employees (generally salaried professionals earning above a salary threshold) are not entitled to overtime under federal law, though some states have broader protections.
Common overtime rates
| Rate | Multiplier | When it applies |
|---|---|---|
| Time and a half | 1.5× | Standard overtime (40+ hrs/week) |
| Double time | 2.0× | Holidays, 7th consecutive day (CA) |
| Time and a quarter | 1.25× | Some union contracts |
How to calculate overtime earnings
To calculate your overtime earnings for the year, use our Salary Calculator and enter your overtime hours. The formula is:
Annual overtime = Overtime weekly earnings × Weeks per year
Example calculation
Regular rate: $20/hr. Weekly overtime: 8 hours. Overtime rate: 1.5× = $30/hr. Weekly overtime earnings: 8 × $30 = $240. Annual overtime (52 weeks): $240 × 52 = $12,480 extra per year.
Does overtime affect your tax bracket?
Yes — overtime income is taxable at your marginal rate. If your overtime pushes your annual income into a higher tax bracket, the additional income in that bracket will be taxed at the higher rate. However, only the income in the higher bracket is taxed at the higher rate, not your entire income (a common misconception).
Tips for managing overtime
- Track your overtime hours carefully — employers sometimes make errors
- Understand whether your role is exempt or non-exempt
- Check your state or country's specific overtime rules, as they may be more generous than federal law
- Factor overtime into your annual income estimate when comparing job offers