Small business · Timecard Calculator
How to calculate overtime on a timecard
Under the federal Fair Labor Standards Act, add up all hours actually worked in one fixed 168 hour workweek. Every hour over 40 is overtime and must be paid at not less than 1.5 times the employee's regular rate. Unpaid breaks are excluded, hours cannot be averaged across weeks, and bonuses tied to work raise the regular rate.
Start with the workweek, not the pay period
The U.S. Department of Labor defines a workweek as a fixed and regularly recurring period of 168 hours, which is seven consecutive 24 hour periods. It does not have to match the calendar week and can begin on any day at any hour, but once chosen it stays fixed. Overtime is measured against this window only.
This matters when the pay period is biweekly or semimonthly. A worker who logs 30 hours in week one and 50 hours in week two has 10 overtime hours, even though the two week total of 80 hours looks like two normal weeks. The Department of Labor states plainly that averaging hours over two or more weeks is not permitted.
Federal law also has no daily overtime. Working 12 hours on Monday creates no overtime by itself if the week ends at 40 hours or below. Some states add daily rules on top of this, and California is the best known example, so check the state rule after you finish the federal calculation.
Step 1: total the hours actually worked
Go through the timecard one shift at a time. For each shift, subtract the clock in time from the clock out time, then subtract any unpaid meal break. A shift from 7:00 to 15:45 with a 30 minute unpaid lunch is 8.25 hours. Short rest breaks that the employer pays for stay in the total.
Only hours actually worked count toward the 40 hour threshold. Paid time off, paid holidays where no work happened, and sick days do not count as hours worked for overtime purposes, even though they appear on the paycheck. If the week contains a paid holiday plus 40 hours of real work, there is no overtime, and the same is true of a week with 8 hours of vacation and 38 hours worked.
Convert minutes to decimals before adding: 15 minutes is 0.25, 20 minutes is 0.33, 45 minutes is 0.75. A timecard calculator such as Benchlet's does this conversion and break subtraction for every row, which removes the most common arithmetic slip.
Step 2: find the regular rate of pay
The regular rate is not always the hourly wage printed on the offer letter. Department of Labor Fact Sheet 56A gives the formula: total compensation in the workweek, except statutory exclusions, divided by total hours worked in the workweek. Nondiscretionary bonuses, shift differentials, commissions, and piece rate earnings all go into the numerator.
Things that stay out of the regular rate include discretionary bonuses decided at the employer's sole discretion, gifts, expense reimbursements, paid leave, employer contributions to benefit plans, and premium pay already paid for overtime or for weekend and holiday work. Those premiums can be credited toward the overtime owed.
When an employee works at two hourly rates in the same week, the regular rate is the weighted average: total straight time earnings divided by total hours. A worker with 32 hours at $11 and 10 hours at $9 earned $442 for 42 hours, so the regular rate is $442 divided by 42, which is $10.52.
Step 3: pay the overtime hours at 1.5 times the regular rate
Overtime hours equal total hours worked minus 40, if positive. Each of those hours is owed at 1.5 times the regular rate. Many payroll systems compute this as straight time for all hours plus a half time premium for the overtime hours; the total is the same.
Worked example. An employee earns $20 per hour, works 46 hours in the workweek, and receives a $92 attendance bonus promised in advance, which makes it nondiscretionary. Straight time earnings are 46 times $20, which is $920, plus $92, for $1,012. Regular rate is $1,012 divided by 46, which is $22.00. Overtime premium is 6 hours times $22.00 times 0.5, which is $66. Gross pay is $1,012 plus $66, which is $1,078.
Compare that with the common mistake of paying 6 hours at $30 (1.5 times $20) and ignoring the bonus: $800 plus $180 plus $92 gives $1,072, which is $6 short. Small on one check, but it repeats every week for every employee, and the Department of Labor notes the overtime requirement cannot be waived by agreement.
Step 4: check the week against state rules
After the federal number is settled, apply any state rule that produces more pay. California, for example, requires 1.5 times pay after 8 hours in a day and double time after 12, plus seventh consecutive day premiums. Where the state and federal results differ, the employee gets the higher amount.
Also confirm the employee is nonexempt. Salaried employees are not automatically exempt; exemption depends on duties tests and salary rules set by the Department of Labor. A salaried nonexempt employee still gets overtime, with the regular rate found by dividing the weekly salary by the hours the salary is intended to cover.
Keep the timecard, the break settings, and the final totals together. Federal recordkeeping rules require employers to keep records of hours worked each day and each week, and a printed or exported weekly summary is the simplest way to show how the overtime figure was reached.
Frequently asked questions
Does overtime start after 8 hours in a day?
Not under federal law. The FLSA counts only hours over 40 in the workweek. Daily overtime exists in a few states, California being the best known, where the state rule adds to the federal one.
Do paid holidays or vacation hours count toward the 40 hours?
No. Only hours actually worked count. A week with 8 hours of holiday pay and 36 hours worked has no overtime, even though the paycheck shows 44 hours.
Can an employer average two weeks to avoid overtime?
No. The Department of Labor states that averaging hours over two or more weeks is not permitted. Each fixed 168 hour workweek stands alone.
Does a bonus change the overtime rate?
A nondiscretionary bonus, one promised in advance for attendance, production, or quality, is added to weekly earnings before dividing by hours worked, which raises the regular rate. A truly discretionary bonus is excluded.
Is unauthorized overtime still owed?
Yes. If the employer knew or should have known the work was performed, the hours count. The employer may discipline the employee for breaking a scheduling rule but must still pay the overtime.
