Is Overtime Per Week or Pay Period?

Overtime compensation ensures fair pay for employees who work extended hours. A common question arises about whether overtime is calculated based on a weekly period or a longer pay period. Understanding the distinction between these timeframes is important for both employers and employees to ensure proper compensation for additional work hours.

The Federal Overtime Standard

Federal law, specifically the Fair Labor Standards Act (FLSA), requires overtime to be calculated on a weekly basis for most non-exempt employees in the United States. Under the FLSA, eligible employees must receive overtime pay at a rate of not less than one and one-half times their regular rate of pay for all hours worked over 40 in a single workweek. For example, if an employee works 45 hours in a specific week, the additional five hours beyond the 40-hour threshold qualify for overtime compensation.

This standard applies regardless of how frequently an employee is paid, such as bi-weekly or semi-monthly. Employers cannot average hours over multiple weeks to avoid paying overtime in a week where more than 40 hours were worked.

Defining the Workweek

Under federal law, a “workweek” is a fixed and regularly recurring period of 168 hours, consisting of seven consecutive 24-hour periods. This period does not need to align with the calendar week; it can begin on any day and at any hour chosen by the employer. Once established, the workweek generally remains fixed for overtime calculation purposes.

Even if an employee is paid bi-weekly, semi-monthly, or monthly, the hours worked are assessed on a week-by-week basis to determine if the 40-hour threshold has been exceeded. For example, if an employee works 45 hours in the first week of a bi-weekly pay period and 35 hours in the second week, they are entitled to five hours of overtime pay for the first week, even though their average for the two weeks is 40 hours.

How State Laws Apply

While the FLSA sets the federal minimum standard, individual states have the authority to enact their own overtime laws. These state laws can provide greater protections or more generous benefits to employees than the federal standard. When state and federal laws differ, employers must adhere to the law that offers the most favorable terms to the employee.

State laws may include additional overtime triggers beyond the federal 40-hour workweek. Some states require daily overtime pay, meaning employees might qualify for overtime after working a certain number of hours in a single workday, such as eight or 12 hours. Other state regulations might mandate overtime for hours worked on a seventh consecutive day in a workweek, even if the total weekly hours do not exceed 40.

Calculating the Overtime Rate

Calculating the overtime rate involves determining an employee’s “regular rate of pay,” which is not always simply their hourly wage. The regular rate includes all forms of compensation paid to an employee for their employment in a workweek. This can encompass non-discretionary bonuses, commissions, and shift differentials, as these are considered part of the employee’s total earnings. Payments such as discretionary bonuses, gifts, and reimbursements for expenses are excluded from the regular rate calculation.

To determine the regular rate, the total compensation for the workweek (excluding statutory exclusions) is divided by the total number of hours actually worked in that week. Once the regular rate is established, the overtime rate is calculated by multiplying this regular rate by 1.5. For instance, if an employee’s regular rate is $15 per hour, their overtime rate would be $22.50 per hour. This rate is then applied to all hours worked beyond the standard threshold to determine the total overtime pay due.