ABA Family Legal Guide

Law and the Workplace

On the Job

Wages and Hours

How is the overtime pay rate computed?

The main issue is to determine the regular rate for the employee in question. When an employee is paid an hourly rate, the employee's regular rate and hourly rate are the same. For example, an employee who is paid $6.00 an hour and who worked 43 hours in the last work week, would be owed $27.00 in overtime pay ($6.00 regular rate x 1.5 = $9.00 overtime rate; $9.00 x 3 [hours worked in excess of 40] = $27.00). The employee's earnings for that week would be $267.00 ($6.00 x 40 hours = $240.00 + $27.00 [overtime] = $267.00).

When an employee is paid a salary or a commission, the employee's compensation must be converted to an hourly rate. Let's say an employee is paid a fixed salary for a regular workweek of 40 hours. This conversion to an hourly rate is accomplished by dividing the employee's compensation for the week by 40 hours. For example, an employee who was paid $240 a week would be paid $6 an hour. If that employee worked 45 hours, he or she would be owed as additional compensation one and one half times the regular rate (5 hours overtime x $6 an hour = $30 x 1.5 = $45). The employee's earnings for that week would be $285 ($240 + $45).