If You Get Paid $20 an Hour, How Much Is Overtime?

Overtime pay is a fundamental aspect of compensation in the United States, designed to provide additional earnings for employees who work beyond standard hours in a workweek. It represents a premium rate paid for extra work performed. The concept of overtime pay is rooted in federal regulations, which define when and how this additional compensation must be provided.

Calculating Standard Overtime Pay

The Fair Labor Standards Act (FLSA) sets the federal standard for overtime pay, mandating that covered non-exempt employees receive one and one-half times their “regular rate of pay” for all hours worked over 40 in a workweek. This requirement applies on a workweek basis, which is a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods. Averaging hours over multiple workweeks is not permitted for overtime calculation.

To illustrate this, consider an employee earning $20 per hour. If this employee works 45 hours in a workweek, they would be paid for 40 regular hours at $20 per hour and 5 overtime hours. The overtime rate is calculated as $20 (regular rate) multiplied by 1.5, which equals $30 per hour. For the 5 overtime hours, the employee would earn $30 per hour, in addition to their regular earnings for the first 40 hours.

The “regular rate of pay” is not simply the hourly wage; it generally includes all remuneration for employment, encompassing not only the hourly rate but also most non-discretionary bonuses, commissions, and other forms of compensation. To determine the regular rate, the total compensation paid in a workweek is typically divided by the total hours worked in that week. This comprehensive calculation ensures that overtime pay reflects the true average hourly earnings of an employee.

What Counts as Hours Worked for Overtime

Generally, hours worked include all time an employee is required to be on duty, at the employer’s premises, or at a prescribed workplace, or is “suffered or permitted to work” by the employer. This definition extends beyond just active work time to include various activities that benefit the employer.

Common scenarios that count as hours worked for overtime purposes include time spent traveling between job sites during the workday or for business away from the home community. Time spent in training sessions required by the employer is also typically considered compensable hours. Additionally, short rest periods, usually 20 minutes or less, are generally counted as hours worked and must be paid.

On-call time can also be considered hours worked if the employee is not free to engage in personal activities and is essentially restricted to the employer’s premises or a specific location. Conversely, bona fide meal periods where an employee is completely relieved from duty are typically not counted as hours worked. Commuting time from home to the regular workplace is generally not compensable.

Common Overtime Exemptions

The FLSA provides specific exemptions from both minimum wage and overtime requirements for certain employees, often referred to as “white-collar” exemptions. These typically include executive, administrative, and professional employees, as well as outside sales employees and certain computer employees.

To qualify for these exemptions, employees must generally meet specific criteria related to their job duties and be paid on a salary basis at or above a certain threshold. For instance, as of July 1, 2024, the annual salary threshold for these exemptions is $43,888, or $844 per week. This threshold is scheduled to increase again on January 1, 2025, to $58,656 annually, or $1,128 per week.

The classification as exempt depends on the actual duties performed, not merely the job title. For example, an executive employee must primarily manage the enterprise or a recognized department and regularly direct the work of at least two or more other employees. Administrative employees typically perform non-manual work directly related to the management or general business operations and exercise discretion and independent judgment. Professional employees often perform work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.