Overtime Pay Rules
Federal law requires employers to pay non-exempt employees 1.5 times their regular rate for hours worked over 40 in a workweek. Some states (like California) require overtime for hours over 8 in a day, and double-time for hours over 12 in a day or over 8 on the seventh consecutive workday. At $25/hour, overtime pays $37.50/hour and double-time pays $50/hour.
Not all employees are eligible for overtime. Exempt employees (typically salaried professionals, executives, and administrators earning over ~$35,500) don't receive overtime pay regardless of hours worked. Non-exempt employees must receive overtime. Misclassifying employees as exempt to avoid overtime pay is illegal and results in lawsuits and penalties.
Overtime can significantly boost income. Working 50 hours weekly (40 regular + 10 overtime) at $25/hour yields $1,375 weekly vs. $1,000 at straight time - an extra $375/week or $19,500 annually. However, consider taxes (overtime pushes you into higher brackets), diminished work-life balance, and sustainability. Consistent excessive overtime may indicate understaffing that employers should address with hiring, not endless overtime.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Non-exempt employees are eligible. Generally, hourly workers and salaried workers earning under ~$35,500 qualify. Exempt employees (most salaried professionals, executives, administrators over the threshold) don't receive overtime regardless of hours.
Federally, hours over 40 in a workweek. Some states have daily overtime (over 8 hours in California). Double-time may apply for hours over 12 daily or working seventh consecutive day (varies by state).
Yes, in most states. Unless you have a contract or union agreement stating otherwise, employers can require overtime. Refusing mandatory overtime can be grounds for termination. However, they must pay you for it.
Federally, per week. Working 12 hours Monday doesn't trigger federal overtime unless you exceed 40 hours for the week. California and some states have daily overtime rules (over 8 hours in a day).
Sort of. All income is taxed the same based on your annual total, but overtime can push you into higher tax brackets. Also, larger paychecks trigger higher withholding percentages even though your effective annual rate may not change much.