Federal Overtime Rules: Time and a Half After 40 Hours in a Workweek

Under the FLSA, nonexempt employees must be paid at least 1.5 times their regular rate for every hour worked over 40 in a workweek. That is the whole federal rule. It is measured week by week, not day by day, and it is based on hours actually worked rather than hours scheduled.

This guide explains who is covered, what a workweek is, how to calculate overtime with a full dollar example, what federal law does not require, and what records you need. State laws can add daily overtime or higher pay, so check with counsel or your state labor department.

Who earns federal overtime

The FLSA applies to employees of covered enterprises (generally those with at least $500,000 in annual business volume) and to employees whose own work is engaged in interstate commerce. In practice, most employers in the United States are covered.

Within a covered employer, nonexempt employees earn overtime. Exempt employees, such as qualifying executive, administrative and professional employees, do not. Exemption depends on a salary basis and a duties test, not on a job title or on being paid a salary. The federal weekly salary threshold is $684 ($35,568 per year), but several states set higher levels. See exempt vs. nonexempt employees for the details.

What is a workweek

The workweek is a fixed, recurring period of 168 hours, which is seven consecutive 24-hour periods. It can start on any day and at any hour, for example Sunday at 12:00 a.m. or Wednesday at 6:00 a.m., but once set it should not change to avoid overtime.

Each workweek stands alone. An employer cannot average two weeks. If an employee works 50 hours in the first week and 30 hours in the second, the 10 extra hours in week one are overtime, even though the two-week total is 80. Pay periods can be weekly, biweekly or monthly, but the overtime calculation is always weekly.

The basic calculation

Overtime pay is the number of hours over 40 multiplied by 1.5 times the regular rate. Consider an employee paid $18.00 per hour who works 46 hours in the week. The regular pay for 40 hours is 40 x $18.00 = $720.00.

The overtime rate is $18.00 x 1.5 = $27.00 per hour. The 6 overtime hours are 6 x $27.00 = $162.00. The total is $720.00 + $162.00 = $882.00.

If the employer paid straight time for every hour, the pay would be 46 x $18.00 = $828.00, and the employee would be short by $882.00 - $828.00 = $54.00. That half-time premium is the amount that matters for the new tax rules on overtime, discussed below.

What counts toward the 40 hours

Only hours worked count. That includes required meetings, training, travel during the workday, and short breaks of 5 to 20 minutes. It does not usually include bona fide meal periods or time away from work. Paid vacation, sick leave and holidays are not hours worked and do not count toward the 40, even though the employee is paid for them.

This is why recording time accurately is more than a payroll detail. A week with 36 worked hours plus 8 hours of paid holiday does not trigger overtime, while a week with 41 worked hours does. The rules on counting time are in what counts as hours worked.

What federal law does not require

Many managers assume federal law requires more than it does. The FLSA does not require daily overtime, overtime on weekends or holidays as such, or a premium for working a seventh day. It does not require meal or rest breaks, paid time off or holiday pay. The minimum wage is $7.25 per hour, although many states and cities have higher minimums.

Those items matter because other laws do. States such as California require daily overtime, and some states require breaks and leave. Always apply whichever rule is more favorable to the employee. Check your state rules to see where they go further.

Paying overtime on time and the tax angle

Consider how the day-by-day view differs from the weekly one. An employee who works 10 hours Monday through Thursday and takes Friday off has 40 hours and earns no federal overtime, even though each day was longer than 8 hours. An employee who works 8 hours Monday through Friday and 2 hours on Saturday has 42 hours and earns 2 hours of overtime. Daily length matters under some state laws, but not under the FLSA.

Overtime must be paid on the regular payday for the pay period in which the workweek ends. If it cannot be computed by then, it must be paid as soon as practicable, no later than the next payday after the calculation.

Under the "no tax on overtime" law, employees can deduct qualified overtime compensation up to $12,500 ($25,000 for joint filers) for tax years 2025 through 2028, with a phase-out that begins at $150,000 and $300,000 of modified adjusted gross income. Only the FLSA-required premium, the "half" in time-and-a-half, qualifies. In the example above, that is the $54.00 premium. Employers report qualified overtime on Form W-2, Box 12, code TT starting with tax year 2026. Read more in no tax on overtime and W-2 reporting.

The cost of getting it wrong

If an employer fails to pay overtime, the employee can recover the unpaid wages plus an equal amount as liquidated damages, plus attorney fees. The statute of limitations is 2 years, or 3 years for willful violations, and employees can join in a collective action under section 216(b). The Wage and Hour Division of the Department of Labor can also investigate.

Recordkeeping is part of the obligation. For nonexempt employees you must keep the hours worked each workday and each workweek, the regular hourly rate, straight-time earnings, the overtime premium and the total wages for each pay period. Payroll records are kept for 3 years and time cards for 2 years, and many states require longer. The full list is in FLSA timekeeping requirements.

The most common causes are unrecorded time, misclassification of employees as exempt, and ignoring bonuses or premiums in the regular rate. Good time records fix the first, and the right tests fix the others.

How SimpleWorkshift Helps With Overtime

SimpleWorkshift records hours as employees clock in and out from the iOS or Android app or the web, with a GPS location on every entry. Automatic overtime calculations show who is approaching 40 hours and who has crossed it, so you can adjust schedules before the week ends.

Managers see time entries and exceptions in real time, work schedules per employee help plan hours, and custom reports and payroll closing deliver clean weekly totals to your payroll process. Start a 30-day free trial, with no contracts and cancel anytime, at simpleworkshift.com.