Overtime

Federal overtime rules under the FLSA

The Fair Labor Standards Act requires overtime for non-exempt employees who work more than 40 hours in a workweek. The rate is at least one and a half times the employee's regular rate of pay, which is why people call it time and a half.

A workweek is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods. It can start any day and time, but it cannot be changed to dodge overtime. Each workweek stands alone: an employer cannot average 50 hours one week and 30 the next to call it 80 hours across two weeks with no overtime. That rule trips up employers paying biweekly.

The federal law does not require overtime for working more than 8 hours in a day, on weekends, on holidays or on a sixth or seventh day. Unless state law or a contract says otherwise, a non-exempt employee who works four 10-hour days earns no overtime.

Only non-exempt employees are owed overtime. Exempt employees who meet the salary and duties tests are not, no matter how many hours they work.

How to calculate the regular rate

Most overtime mistakes are not about counting hours. They are about the rate. The regular rate is not always the hourly rate on the offer letter. It includes:

• Hourly wages for all hours worked.
• Non-discretionary bonuses: attendance bonuses, productivity or quality bonuses, retention bonuses promised in advance, sign-on bonuses contingent on staying a set period, and referral bonuses in many cases.
• Shift differentials and lead pay.
• Commissions.

It can exclude truly discretionary bonuses (where both the fact and amount are decided at the employer's discretion near the end of the period), gifts, expense reimbursements, paid time off for hours not worked, and certain premium payments.

When a bonus covers more than one week, such as a monthly or quarterly incentive, the employer has to go back and allocate it across the weeks it was earned and pay additional overtime for any week with overtime hours. Payroll systems often miss this. A quarterly attendance bonus at a contact center with regular 45-hour weeks can create a recurring underpayment across hundreds of agents.

State overtime rules, including daily overtime in California

States can require more than the FLSA, and when they do, the employee gets the more generous rule.

California is the most demanding:

• Time and a half for hours over 8 in a workday and over 40 in a workweek.
• Double time for hours over 12 in a workday.
• Time and a half for the first 8 hours on the seventh consecutive day worked in a workweek, and double time after 8 hours that day.

Alaska requires daily overtime after 8 hours, Nevada requires it after 8 hours for employees earning less than one and a half times the state minimum wage, and Colorado requires overtime after 12 hours in a workday or 12 consecutive hours. Some states, such as Pennsylvania and New York, have their own rules on how bonuses feed into the overtime rate or on salaried non-exempt pay. Check the rules for the work location, including for remote employees. This page covers the main rules only; specific industries and collective bargaining agreements can change the answer.

Unauthorized overtime and off-the-clock work

If an employee works it, the employer pays it, even if a manager never approved it. The FLSA standard is that work suffered or permitted is work time. An employer can discipline an employee for breaking an overtime approval rule, but cannot refuse to pay or move the hours to next week.

The common sources of unrecorded overtime in hourly operations:

• Logging into phone systems, VPN and CRM tools before clocking in.
• Finishing an active customer call after the shift ends.
• Required pre-shift huddles or post-shift wrap-up.
• Reading schedule changes and answering manager texts on personal phones.
• Auto-deducted 30-minute lunches when the agent was pulled back to the queue.

Comp time is another trap. Private employers cannot give time off later in place of overtime pay. Only public sector employers can use comp time under the FLSA. A private employer can rearrange hours within the same workweek to avoid going over 40, but that is not the same thing.

Managing overtime in high-volume operations

Overtime is a normal tool during peak periods, ramp-ups and coverage gaps, but it is expensive and wears people down. A workforce management team should treat it as a planned lever, not a default.

Practical controls:

• Forecast overtime needs alongside headcount and capacity planning. If a site runs 10% overtime every week for a quarter, that is a hiring problem, not a staffing blip.
• Make sure time and attendance capture starts at first system login.
• Set an approval workflow, but always pay first and coach second.
• Watch fatigue. Agents working repeated 50-hour weeks show higher absenteeism and attrition, which drives more overtime for everyone else.
• Audit the regular rate calculation in payroll every time you launch a new bonus or incentive.

As for taxes, the federal tax law enacted in July 2025 created a temporary income tax deduction for qualified overtime compensation from 2025 through 2028, which applies to the premium portion of FLSA-required overtime. Employers need to report qualified overtime separately, so payroll should be able to break out the premium amount.