Overtime pay is calculated when an employee works more than 40 hours in a workweek (or another defined threshold). Most employers use a 1.5x multiplier for overtime hours.
Overtime Formula:
Regular Pay = Hourly Rate × Regular Hours
Overtime Pay = Hourly Rate × Overtime Multiplier × Overtime Hours
Total Gross Pay = Regular Pay + Overtime Pay
In the United States, overtime is typically paid at 1.5 times the employee’s regular hourly rate after 40 hours in a workweek. Some states or industries may have additional regulations.
Overtime increases labor costs significantly. A small increase in overtime hours across multiple employees can quickly raise total payroll expenses and reduce profit margins.
Need to analyze labor efficiency? Try our Labor Per Unit Calculator.