FLSA Overtime Rules: Who Gets Overtime, How to Calculate It and Common Employer Mistakes

The Fair Labor Standards Act (FLSA) is a US federal law that establishes minimum wage, overtime pay, and recordkeeping requirements for covered employees. Under federal law, most nonexempt employees must receive overtime pay at 1.5 times their regular rate for hours worked beyond 40 in a workweek. This guide explains who qualifies for overtime, how to calculate overtime pay, and which employer mistakes can lead to back pay. State and local laws may provide additional protections. This article is for general information only and is not legal advice.

FLSA overtime in one paragraph

The FLSA overtime rules generally require covered, nonexempt employees in the United States to receive at least 1.5 times their regular rate of pay for hours worked over 40 in a fixed workweek. Section 7(a) of the Fair Labor Standards Act, 29 U.S.C. § 207(a), establishes this federal overtime requirement. Employers must calculate overtime separately for each workweek rather than average hours across multiple weeks. Some employees qualify for specific exemptions, and state laws may provide greater overtime protections.

For small businesses, compliance starts with three questions: Is the employee covered by the FLSA, does an exemption apply, and how many compensable hours were worked? The US Department of Labor's Wage and Hour Division explains the federal overtime requirements in Fact Sheet 23.

The US Department of Labor's Wage and Hour Division administers and enforces federal wage and hour requirements. Its Fact Sheet 23 explains the FLSA's overtime pay provisions. Employers should also review the applicable federal regulations and state labor laws before making payroll or employee-classification decisions.

Who is entitled to overtime

Most employees covered by the FLSA are entitled to overtime compensation unless they fall into one of the statutory overtime exemptions. You're eligible for overtime if the law, your actual job responsibilities, and your reasonable work compensation requirements all align to make you entitled to overtime. A job title, employment contract, or salary does not by itself deprive you of overtime rights.

The following laws provide overtime for most nonexempt covered employees: 29 U.S.C. §§ 207 and 213. Certain executive, administrative, professional, outside sales, and other employees may be exempt if they meet the appropriate legal requirements.

Fortunately, being aware of the distinction between exempt and nonexempt employees is necessary for HR managers. The employee who calls in sick to the boss also might qualify for overtime if he or she is a nonexempt worker whose job does not satisfy the requirements of the executive exemption. Employers need to examine the actual job duties and the regulations that are laid out in 29 CFR Part 541.

Certain jobs are exempted – check on a case-by-case basis. Detail your job responsibilities, how you are paid, and any changes in your job duties, instead of titles. Misclassification can cost the business unpaid overtime, double damages and attorney's fees.

How the 40-hour workweek is counted

Under the FLSA, nonexempt employees are entitled to overtime after working forty hours in a seven-day, recurring workweek. Each workweek is independent, and hours worked in other workweeks are not considered to determine overtime liability. See 29 CFR Sections 778.103, 778.104 and 778.105.

A workweek has 168 consecutive hours, starting any day of the week at any hour. Employers must establish a fixed workweek and use it without change for the same employees.

For instance, you worked 46 hours in the first week and 34 hours in the second. In the first week there were six hours of overtime, even though the combined total for the two weeks is 80 hours. The shorter second week does not cancel out the overtime from the first week.

It is your responsibility to be paid for any work you perform prior to the beginning of the scheduled work hours, after your scheduled work hours, or off the employer's premises, even when you are asked to work at home. See 29 CFR Sections 785.11 and 785.12.

The department typically treats short breaks of less than 20 minutes as paid work time, while genuine meal breaks may typically be unpaid when the worker is completely excused from work duties. See 29 CFR Sections 785.18 and 785.19.

Employers should also ensure that time is reported properly and that non-payment for work the employee was entitled to is not used to discipline the employee with respect to unauthorized overtime.

Regular rate of pay and what it includes

The normal rate of pay is used for overtime calculations and could be different from the hourly rate paid to an employee. Pursuant to 29 U. S. C. Section 207(e) and 29 C. F. R. Part 778, employers are usually required to include pay for work except where a particular statutory exemption is available.

For an employee at a single rate per hour, the calculation is:

Overtime rate = Regular hourly rate x 1.5 x overtime hours.

Suppose you've got one employee making $20 an hour who works 45 hours a week. He earns $800 for his first 40 hours, plus an additional $150 for his five overtime hours. You'd be paying him $950 per week when you exclude overtime pay but include a regular rate.

This calculation can be skewed by qualifying nondiscretionary bonuses and commissions. In some cases a bonus may have to be included in the regular rate of pay 29 CFR Sections 778.208 and 778.209 - possibly requiring an additional overtime calculation.
Suppose an employee makes $20 per hour, works 45 hours in a week, and earns a qualifying $90 production bonus credited to that workweek.

• Straight-time wages for 45 hours: $900
• Qualifying bonus: $90
• Total includable compensation: $990
• Regular rate: $990 ÷ 45 = $22 per hour
• Additional half-time overtime premium: $22 × 0.5 × 5 = $55

If the employee has been paid straight time wages for all 45 hours and no special rule modifies the computation, the extra overtime premium earned is $55. Total pay for the week is $1,045.

Certain discretionary bonuses and qualifying expense reimbursements are possible exclusions, but the conditions should be confirmed by the employer. These 29 CFR Part 778 overtime regulations specify the rules for various types of pay arrangements, bonuses, commissions and overtime premiums.

Salary threshold and duties tests

Simply being paid a salary does not mean a worker is exempt from overtime. In order to qualify for the standard executive, administrative, and professional exemptions, an employer must meet the proper salary-basis, salary-level, and duties tests of 29 U.S.C. Section 213(a)(1) and 29 CFR Part 541.

On the date of this verification, the US Department of Labor currently uses the standard federal salary threshold of 684perweek(35,568 annually), and an annual total compensation threshold of $107,432 for highly compensated employees. These are based on the 2019 rule that was in effect for enforcement after a federal district court vacated the Department's 2024 overtime rule in November 2024. Confirm legal requirements before classifying employees.

Getting the salary up to the maximum won't get you there. In order to be deemed an executive, job duties must be principally executive in nature -i.e., management's primary duty. It must also involve the routine supervision of at least two full-time employees or their equivalent.

Responsibilities for administrative and professional exemptions What are other rules for some jobs? Other jobs - such as certain outside salespeople, teachers, and computer professionals - have their own rules.

For each claimed exemption, employers should keep a record of the duties test and the compensation requirements that apply. Revisit classifications as duties or pay structures change.

State overtime laws that go further

State laws can require more overtime rights than federal law does. Employers need to determine the rules that apply to where a worker performs his or her job. Employers are responsible for following the applicable federal, state and local laws. See 29 U.S.C. Section 218(a).

Three examples show why employers should review local requirements:

• California: For nonexempt employees protected by California labor law, overtime is due in most cases after eight hours per workday or 40 hours per workweek, and double-time is required in other cases.
• Alaska: Overtime is required in Alaska when an employee works more than eight hours in a day, or more than 40 hours in a week, though there are specific exceptions. There is also an exception for smaller employers (those with less than four employees), so employers will need to verify how the law applies to them.
• Colorado: Employees covered by the COMPS Order are generally due overtime if they work more than 40 hours in a workweek, more than 12 hours in a workday, or more than 12 consecutive hours. This calculation is dependent on the rules and the exemptions.

These are just overall examples, and do not represent a complete statement of the law in each state.

Broken down by State, employers need to be familiar with rules governing meal and rest breaks laws by state. Under federal law, adults do not typically need to be given meal or rest breaks, but any short breaks are typically counted as paid time ( 29 CFR Section 785.18). State rules may require other additional breaks or requirements.

One national policy is unlikely to meet all states' needs. A good rule of thumb is to understand the rules applying to where the employee is working. Employers outside the United States should adhere to their employment laws.

Recordkeeping that protects you in an audit

Well-maintained records allow employers to prove that employees have been paid the wages mandated by law. In fact, covered employers must keep certain records of employment and of the individual hours employees work in compliance with FLSA Section 11(c), 29 U.S.C. Section 211(c), and 29 CFR Part 516.

29 CFR, Section 516.2 states that most records for nonexempt employees must show hours worked each day and week, wage rates, regular earnings, overtime earnings, deductions, additions to wages, and total wages paid.

For the most part, payroll records (such as time sheets, wage rate tables, work schedules, and sales receipts) must be kept for three years, and supporting records (such as individual employee records, collective bargaining agreements and sales and purchase records) must be kept for two years. Other laws may require longer periods.

These obligations are described in the guidance issued by the US DOL Wage and Hour Division Fact , Sheet 23 relates to federal overtime. Fact Sheet 21 relates to federal recordkeeping. The federal recordkeeping requirements are set out in the 29 CFR Part 516 recordkeeping regulations.

For small companies, accurate time-keeping is preferable to trying to recoup hours after an employee complains. Workers should be clocking in and out for real, managers should double check where hours don't add up, payroll should compare wages with hours.

Time and attendance software for US small businesses will assist in managing attendance, hours worked, approvals and time-off adjustments. Ultimately, software alone cannot ensure compliance. It is the employer's responsibility to record time accurately and compute wages legally.

Common mistakes and back-pay exposure

Some of the most prevalent FLSA overtime mistakes are employee misclassification, failure to include compensable work, improper use of the regular rate, averaging hours over workweeks, and incomplete records. Routine payroll audits allow companies to spot these errors before they turn into costly disputes.

Another mistake is that salaried employees don't qualify for overtime. The other was that the company denied payment because the overtime had not been approved ahead of time.

29 CFR Section 785.11: Employers may also be held responsible for paying employees for work that they either knew or should have known about, even if it was against company policy.

Mishandling the bases on which bonuses are paid is a common method of undercalculating them. Computing the wrong 'scale' (by, for instance, excluding a nondiscretionary bonus from the regular rate) might deliver an unprofitable overtime premium.

Employees are entitled to recover their unpaid overtime, and in certain instances an equal amount of liquidated damages, plus attorneys' fees and costs. The limiting period for most federal claims is two years, but can be extended to three years for willful violations to under 29 U.S.C. Section 255(a).

To reduce exposure, employers should investigate discrepancies, correct payroll errors, preserve records, and seek qualified employment-law advice when potential violations arise.

Practical overtime compliance checklist

Before closing payroll, employers should confirm that:

• Employee classifications satisfy the applicable exemption tests.
• All compensable hours are recorded.
• Overtime is calculated separately for each workweek.
• Qualifying bonuses and commissions are included in the regular rate.
• State overtime and break requirements have been checked.
• Payroll and supporting time records are retained for the required periods.
• Employees can report missing hours or pay discrepancies.

Employers seeking free tools can use a spreadsheet and calculator for basic overtime calculations. Keep in mind that you will not be able to work through all exemptions, state-law variations, and complicated pay structures. Compare your calculations to the law.

Conclusion

By knowing FLSA overtime rules, small business owners can catch payroll mistakes and safeguard employee entitlements. All pay for hours worked should be classified properly, all hours paid and worked should be included in the total, the regular rate must be determined properly and record keeping practices need to be thorough.

Attendance.ai, a provider of time and attendance software for US small businesses, which may be helpful to businesses looking to organize attendance records. Technology can make record keeping easier, but employers must verify class and payroll calculations to satisfy relevant legal tests.

FAQ’s

1. What are the FLSA overtime rules?

A covered, nonexempt employee must generally be paid time-and-a-half of their regular rate of pay for hours worked over 40 in a fixed workweek period ( 29 U.S.C. Section 207 (a)).

2. Are salaried employees entitled to overtime?

Yes. Certain salaried employees may be eligible for overtime pay because salary is not the sole factor in determining exemption. The employee must meet the compensation and duty tests under 29 CFR Part 541.

3. How do you calculate overtime pay?

Example: if an employee makes $20 an hour and has 5 hours of overtime, the calculation would be $20 x 1.5 x 5 which would give you $150 in overtime pay. This assumes you have no other pay that would add to the regular rate.

4. Must employers pay for unauthorized overtime?

Typically, yes, if the employer knew or should have known that the employee was working. Employers can require approval but not otherwise deny payment for hours worked.

5. How long must employers keep overtime records?

Federal rules generally require payroll records to be retained for at least three years and certain supporting records for two years. See 29 CFR Sections 516.5 and 516.6.

Disclaimer: This article is general educational information, not legal advice. Federal requirements can change, and state, local, and non-US laws may differ. Consult qualified legal counsel about specific employment and payroll issues.