Compliance & Payroll Basics · Policy-manual review
Overtime Rate per Hour: What 1.5x Misses
The overtime rate is not the base wage. How to find the regular rate with two pay rates, a non-discretionary bonus, a shift differential or piecework.
At a glance
Start from the base hourly wage, then check whether it is really the regular rate. If the week holds a second rate, a non-discretionary bonus, a night differential, piecework or a commission, rebuild the regular rate as total straight-time earnings divided by hours worked, and pay half of that rate on top of straight time for each hour over 40. Where a bonus covers several weeks, spread it back over the weeks it was earned before recalculating. The state threshold matters too, because a few states add a daily overtime rule on top of the federal week.
- Write down the regular rate for the week before calculating anything, because the base wage and the regular rate match only when there is a single rate and no other pay
- Add every hourly rate the employee worked that week, multiply each by its hours, and divide the total by all hours worked
- Fold in non-discretionary bonuses before dividing: production, attendance, safety and retention payments announced in advance
- Spread a bonus that covers more than one week back over the weeks it was earned, then recalculate the regular rate for each overtime week in that period
- Include night and shift differentials, because they are not overtime premiums and the regular rate has to carry them
- Divide piece-rate and commission earnings by the hours worked in the same week before applying the half-time premium
- Leave gifts, discretionary bonuses, expense reimbursements and vacation, holiday or sick pay out of the regular rate, but remember none of them can be credited toward overtime
- Pay overtime as straight time for every hour plus one-half the regular rate for the hours over 40, not as 1.5 times the base rate
- Recheck any week in which a bonus, a second rate or a differential appears, because the error is usually in the regular rate rather than the multiplication
- Confirm the state rule before relying on the 40-hour week alone, since a few states also count hours over 8 in a day
§1The overtime rate, in one paragraph
The overtime rate is one and one-half times the employee's regular rate, and the regular rate is not always the hourly wage on the pay stub. It is the employee's total straight-time earnings for the workweek, including most bonuses, shift differentials, piece rates and commissions, divided by the hours actually worked. [29 CFR 778.107 and 778.108, eCFR, checked 13 October 2026]
When a week holds a single hourly rate and no other pay, the two numbers are the same and the calculation is short. Add a second rate, a production bonus, a night premium or a piece rate, and they come apart. The gap looks small in one week and grows across a quarter, because every overtime hour in the affected period was paid at the wrong rate.
This guide works through the cases where the wage and the regular rate separate, using the worked examples in the Department of Labor's own regulation and its overtime fact sheet.
§2When the week holds a single rate
For an employee paid a single hourly rate, the regular rate is that rate, and the overtime premium is one-half of it for each hour over 40. [29 CFR 778.110(a)]
Take $12 an hour and 46 hours worked. Straight-time earnings are 46 × $12 = $552. The half-time premium is 6 × $6 = $36. Total pay is $588, which is the same as paying $12 for the first 40 hours and $18 for the six overtime hours. [778.110(a), eCFR, checked 13 October 2026]
State the method precisely, because it is the one that carries into the harder cases: pay straight time for every hour worked, then add half the regular rate for the overtime hours. Change the regular rate and the whole calculation moves with it. The time card calculator runs that weekly overtime step from the hours you enter, but it takes the rate as given, so the regular rate still has to be worked out first.
§3Two rates in one workweek: the weighted average
Where an employee works at two or more different rates in a single workweek, the regular rate is the weighted average of those rates, not the higher one and not the lower one. Add up the earnings from every rate, then divide by all the hours worked. [29 CFR 778.115]
Worked example: 45 hours, made up of 30 hours at $22 and 15 hours at $16. Earnings are $660 + $240 = $900. The regular rate is $900 ÷ 45 = $20.00. Five of the hours are overtime, so the premium is half of $20.00 for each of them, or $50.00, and total pay is $900 + $50 = $950.00.
| Hours | Rate | Earnings |
|---|---|---|
| 30 | $22.00 | $660.00 |
| 15 | $16.00 | $240.00 |
| 45 | Regular rate $20.00 | $900.00 straight time |
| 5 (overtime) | Half-time premium $10.00 | $50.00 |
| Total due | $950.00 |
Paying those overtime hours at one and one-half times the $22 rate would give a premium of $55, more than the law requires. Paying at the $16 rate would give $40, which is $10 short. A payroll system that runs overtime on a single primary rate lands on one of those two wrong numbers.
Section 7(g)(2) of the Act allows an alternative in narrow conditions, paying one and one-half times the rate in effect for the overtime work itself, and the requirements sit in 29 CFR 778.415 through 778.421. [Department of Labor Fact Sheet #23, checked 13 October 2026]
§4A bonus that reaches back over the weeks it was earned
A non-discretionary bonus belongs in the regular rate. Production, attendance, safety and retention payments that the employer promises in advance, or that employees come to expect, are included. A bonus the employer is free to withhold, and a gift, are not. [29 CFR 778.208]
When the bonus covers one week, the arithmetic is short. An employee on $18 an hour who works 45 hours and earns a $45 bonus has straight-time earnings of $810 + $45 = $855. The regular rate is $855 ÷ 45 = $19.00, and the half-time premium is 5 × $9.50 = $47.50.
The harder case is a bonus that covers several weeks. The regulation requires it to be apportioned back over the period it was earned, and the overtime for every week in that period recalculated. [29 CFR 778.209] A quarterly bonus is not a single-week event for this purpose. It lifts the regular rate of each overtime week in the quarter, which makes the correction retroactive: the difference is owed after the bonus has already been paid.
Run the arithmetic before the bonus posts rather than after, and budget for the catch-up if a plan has been paying bonuses without it. Where hours are moved inside a single workweek instead of paid as overtime, our comp time rules cover what a private employer can and cannot do.
§5Shift differentials, piecework and commission
A night or weekend shift differential is not an overtime premium, so it cannot be left out of the regular rate. The regulation says so directly: nonovertime premiums such as nightshift differentials are included before statutory overtime is computed. [29 CFR 778.207(b)]
Example: an employee on a $20 base works 36 hours at $20 and 9 hours at a $22 night rate in a 45-hour week. Earnings are $720 + $198 = $918, the regular rate is $918 ÷ 45 = $20.40, and the premium is 5 × $10.20 = $51.00.
Pieceworkers follow the same shape. Total piece earnings, plus any production bonus and pay for waiting time, divided by hours worked gives the regular rate, and overtime is half of it on the hours over 40. [29 CFR 778.111] An employee who earns $616 in piece rates plus a $44 bonus across 44 hours has a regular rate of $660 ÷ 44 = $15.00 and a premium of 4 × $7.50 = $30.00.
Commissions are included whether they make up the whole of the pay or sit on top of a salary, and whether they are paid weekly or on a longer cycle. [29 CFR 778.117] A commission paid for a workweek is added to that week's other earnings, and the total is divided by the hours worked. [778.118]
§6Payments that stay out of the regular rate
Section 7(e) of the Act lists the payments excluded from the regular rate. The categories are narrow, and each carries a condition.
| Category | Example | What the condition requires |
|---|---|---|
| Gifts and special-occasion payments | A holiday gift | Not measured by hours, production or efficiency |
| Discretionary bonuses | A bonus the employer decides on with no prior promise | The employer keeps discretion over the amount and whether to pay |
| Expense reimbursements | Tools, mileage, travel | Must reasonably approximate the expense incurred |
| Pay for idle time | Vacation, holiday or sick pay | Occasional, not a regularly scheduled absence |
| Overtime premiums | The extra half for hours over 40 | Only the premiums the statute defines |
| Call-back, show-up and reporting pay | A minimum call-out payment | Only the amount above pay for hours actually worked |
| Talent fees | Fees paid to performers | As defined in the regulations |
Exclusion is not a free pass. A payment left out of the regular rate also cannot be credited toward the overtime owed, so a holiday bonus cannot be set aside from the regular rate and then counted against the overtime bill. [29 CFR 778.216]
§7Why 1.5 times the base rate is often the wrong number
The shortcut in most payroll guides, multiply the hourly wage by 1.5 for the overtime hours, gives the right answer only when the wage is the regular rate. When it is not, the shortcut pays the base rate for every hour and half the base rate for the overtime hours, and the employee is owed the difference.
Put the two methods beside each other on the bonus example above. The correct method pays the regular rate of $19.00 for all 45 hours and adds half of $19.00 for the five overtime hours, for $902.50. The shortcut pays $18 for all 45 hours, adds half of $18 for the five overtime hours, and pays the $45 bonus on top, for $900. The gap is $2.50 in this one week.
Small per week, but it repeats in every week the bonus is counted against, and it grows with the size of the payment that was left out. A payment that adds $5 to the regular rate costs $12.50 more in premium across a 45-hour week on its own, before it is spread over a quarter of overtime.
§8The regular rate and the new federal overtime deduction
Since the 2025 tax year, employees can claim a federal deduction for qualified overtime compensation. The deduction is the part of overtime pay that exceeds the regular rate, which is the half portion of time and a half, and it is defined by reference to the same regular rate this guide is about. [IRS, Questions and answers about the new deduction for qualified overtime compensation, checked 13 October 2026]
The deduction is capped at $12,500 for the year, or $25,000 on a joint return, and it phases out once modified adjusted gross income passes $150,000, or $300,000 for joint filers. [IRS Q&A, checked 13 October 2026]
The payroll point is narrow but real. Because the deduction is measured against the regular rate, a regular rate that is too low understates both the wages owed and the overtime premium the employee can point to on their return. For tax year 2025, employers were not required to report the amount separately, though some used box 14 of the W-2. For 2026 and later, separate reporting is required. [IRS Q&A, checked 13 October 2026]
§9Where the state rule changes the answer
Federal law sets a floor, and a state may require more. California is the clearest example: overtime is owed after eight hours in a workday as well as after 40 in a workweek, at one and one-half times the regular rate for hours over eight up to twelve, and at double the regular rate for hours beyond twelve and for hours over eight on the seventh consecutive day. [California Department of Industrial Relations, overtime FAQ, checked 13 October 2026]
That changes how many hours carry a premium, and it can change the regular rate itself, because a state may treat a payment differently from the federal rule. Check the state's own rule before relying on the 40-hour week alone. Our state minimum wage reference lists current rates by state.
§10Frequently asked questions
How do you figure out the overtime pay rate? Work out the regular rate first: total the week's straight-time pay, divide by the total hours, then pay an extra half of that rate for each hour beyond 40. Where one hourly rate applies and nothing else is paid, the two figures are identical. [29 CFR 778.107; 778.110, eCFR (13 Oct 2026)]
Is a bonus included in the overtime rate? Yes, if it is non-discretionary. An attendance, productivity or retention award that was promised or expected lifts the rate used for the week it was earned in, so overtime for that week has to be recomputed. A bonus left entirely to the employer's discretion, or a gift, stays out. [29 CFR 778.208 and 778.209, eCFR (13 Oct 2026)]
What happens when an employee is paid at two rates in the same week? Blend the two. Take the earnings from both rates, divide by the total hours, and use that blended figure for the premium on hours past 40. [29 CFR 778.115, eCFR (13 Oct 2026)]
Does the premium for overtime hours count toward the regular rate? No. The premium sits outside the regular rate, so it does not feed back into the calculation. Build the rate from straight-time pay, then add the premium on top for any hour past 40. [29 CFR 778.200, eCFR (13 Oct 2026)]
How is overtime calculated for a day rather than a week? Federal law does not use a daily test. It looks at the 40-hour workweek, and one week cannot be averaged against another. [29 CFR 778.104 and 778.105, eCFR (13 Oct 2026)] A few states do set a daily threshold, so a per-day figure usually points to a state rule.
What is the new overtime rule for 2026? The 2024 attempt to raise the white-collar salary threshold was struck down by a federal court in November 2024, and a technical amendment effective 15 May 2026 cleared the vacated wording out of the Code of Federal Regulations and put the earlier figures back. Those are $684 a week, or $35,568 a year, for the standard salary level, and $107,432 for highly compensated employees. [91 FR 27833, effective 15 May 2026]