Overtime pay is calculated by multiplying the hourly wage of an employee by 1.5. Federal law sets the standard working week at 40 hours, so any time worked past this point is considered overtime. However, some employees are exempt, typically those on a salary or fixed wage.
It is important to note that employees who work overtime are only paid more for the number of hours worked past the 40-hour mark. The first 40 hours that an employee works is still paid out at the regular rate. The Wage and Hour Division of the U.S. Department of Labor oversees overtime pay and related working conditions through the Fair Labor Standards Act. Employees who are exempt from overtime pay are reviewed on a case-by-case basis.
Overtime pay is not awarded for work completed at night, on holidays, or over the weekend. The rates for working during these times are handled between the employer and the unions. The FLSA stipulates that employers must keep detailed records of all wage payments to employees, including overtime pay. If an audit is conducted on a company's books, the employer must be able to show that FLSA standards were followed for allocating overtime pay. Finally, some state laws regarding overtime pay are stricter than those of the federal government. In this case, the more stringent law must be followed.