Overtime pay is compensation for hours worked beyond an employee’s standard work schedule. The calculation depends on whether the employee is hourly or salaried, what the agreed overtime rate is, and whether any legal minimums apply. For hourly workers, overtime calculation is a straightforward multiplication. For salaried employees, it requires converting the salary into an hourly equivalent first.

This guide covers how to calculate overtime pay across different employee types and common rate structures.

Key Takeaways

  • Overtime is hours worked beyond the standard work week (typically 40 hours in the US, 48 hours in the UK under the WTR).
  • Common overtime rates are time-and-a-half (1.5×) and double time (2×).
  • For salaried employees, calculate the regular hourly rate by dividing salary by normal weekly hours before applying the overtime multiplier.
  • There is no federal legal requirement for overtime pay in the UK beyond the Working Time Regulations cap — but most employers and contracts specify overtime rates.
  • The US Fair Labor Standards Act (FLSA) requires overtime pay at 1.5× for hours over 40 per week for non-exempt employees.

Step 1: Determine the standard work period

The first step is defining when overtime kicks in:

  • US (FLSA): Overtime applies to all hours over 40 in a single workweek.
  • UK: There is no statutory overtime rate. The Working Time Regulations cap average weekly hours at 48 unless the employee opts out. Any overtime rate is contractually agreed.
  • Australia: Modern Awards specify overtime rates — typically 1.5× for the first 2 hours, then 2× after that.

Check the employment contract or applicable award to confirm the threshold.

Step 2: Identify the regular hourly rate

For hourly employees

The regular rate is the employee’s stated hourly wage.

Example: Employee earns £15 per hour.

For salaried employees

Convert the salary to an hourly rate:

Formula:

Regular hourly rate = Annual salary ÷ (52 × normal weekly hours)

Example: £35,000 salary, 37.5-hour work week:

  • £35,000 ÷ (52 × 37.5) = £17.95 per hour

Step 3: Identify overtime hours

Count all hours worked beyond the standard work period. Only actual hours worked count — breaks, rest periods, and time on-call where the employee was not required to work do not count.

Example: Employee worked 45 hours in a week with a 40-hour standard.

  • Overtime hours = 45 − 40 = 5 hours

Step 4: Apply the overtime multiplier

Time-and-a-half (1.5×)

Overtime pay = Overtime hours × Regular rate × 1.5

Using the £15/hour employee with 5 overtime hours:

  • 5 × £15 × 1.5 = £112.50 in overtime pay

Double time (2×)

Overtime pay = Overtime hours × Regular rate × 2

UK common rates

Many UK employers use:

  • First 8 hours overtime: time-and-a-half
  • Additional hours: double time

Or a flat rate per hour for all overtime. The contract specifies which applies.

Step 5: Calculate total weekly pay

Total pay = (Regular hours × Regular rate) + Overtime pay

Using the example above:

  • Regular: 40 × £15 = £600
  • Overtime: £112.50
  • Total: £712.50

Handling salaried employees

For salaried employees, the calculation differs slightly because the salary is fixed:

  1. Calculate the regular hourly rate: salary ÷ (52 × weekly hours).
  2. Multiply the regular rate by the overtime multiplier.
  3. Apply to hours worked beyond the standard week.

Exempt vs non-exempt (US)

Under the FLSA, certain employees are exempt from overtime — typically executive, administrative, professional, and computer employees who meet specific salary and duties tests. Non-exempt employees must receive overtime regardless of whether the hours were pre-approved.

Common overtime calculation errors

1. Forgetting to include non-salary compensation in the regular rate

The regular rate may need to include bonuses, shift differentials, or commissions that are not already part of the base hourly rate. The FLSA requires these to be factored in.

2. Using monthly salary divided by weeks per month

Divide annual salary by 52 weeks to get the weekly figure. Do not divide monthly salary by 4.33 — the small rounding error compounds.

3. Not counting hours from multiple jobs

If the same employee works two different roles for the same employer, the total hours across both roles count toward the overtime threshold under the FLSA.

4. Assuming salaried employees are automatically exempt

Being paid a salary does not make an employee exempt from overtime. They must meet the salary threshold and the duties test.

Putting it into practice

Five checks cover most overtime calculations:

  1. Confirm whether the employee is exempt or non-exempt, and what the overtime threshold is under their contract or applicable law.
  2. Calculate the regular hourly rate from the employee’s pay, including any bonuses or differentials that form part of the regular rate.
  3. Track actual hours worked — not just contracted hours.
  4. Apply the correct multiplier based on the contract or applicable award.
  5. Process overtime through payroll with the correct tax and National Insurance deductions.
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Frequently Asked Questions

What is the standard overtime rate?

The most common overtime rate is time-and-a-half (1.5× the regular hourly rate). Some employers and awards also specify double time for additional hours.

Do all employees qualify for overtime pay?

In the US, non-exempt employees under the FLSA qualify for overtime. In the UK, there is no statutory overtime pay — it depends on the contract. Some employees may be exempt based on their salary and role.

How do you calculate overtime for a salaried employee?

Divide the annual salary by (52 × normal weekly hours) to get the regular hourly rate, then apply the overtime multiplier to hours beyond the standard work week.

Is overtime pay tax-deductible?

Yes. Overtime pay is subject to income tax and National Insurance (UK) or federal and state income tax and FICA (US) in the same way as regular pay.

Can an employer ask an employee to work unpaid overtime?

In the UK, employers cannot require an employee to work more than 48 hours per week on average unless the employee has opted out in writing. Unpaid overtime may be lawful if it is in the contract and the employee voluntarily agrees.

This article is general information, not legal advice.

Last updated: 26 July 2026.