The FLSA Overtime Standard
The Fair Labor Standards Act (FLSA) requires covered employers to pay non-exempt employees at least 1.5 times their regular rate of pay for all hours worked beyond 40 in a single workweek. A "workweek" is any fixed, regularly recurring 168-hour period — it does not have to align with the calendar week. Employers cannot average hours across multiple weeks to avoid overtime.
State Law Can Exceed Federal Minimums
Several states have overtime laws that are more generous than FLSA. California is the most notable: it mandates 1.5× for hours over 8 in a day (not just 40 in a week), and 2× (double time) for hours over 12 in a day or any hours worked on the 7th consecutive day of a workweek over 8. Colorado requires OT after 10 hours in a day. Alaska and Nevada have daily overtime provisions as well. When state and federal law conflict, the law most favorable to the employee applies.
The Regular Rate of Pay: More Than Just Your Wage
The FLSA regular rate of pay is often misunderstood. It is not simply your hourly wage. The regular rate must include: your base wage, non-discretionary bonuses (bonuses that employees expect and that aren't purely at the employer's discretion), and shift differentials (e.g., a night-shift premium). Non-discretionary bonuses are divided by the total hours worked in the period and added to the base rate before calculating overtime. This can meaningfully increase your overtime rate — and your paycheck.
The Overtime Tax Myth, Debunked
One of the most pervasive payroll misconceptions is that "overtime is taxed at 50%" or at some special high rate. This is completely false. Overtime pay is ordinary income, taxed at the same marginal rates as any other earned income. The confusion arises because overtime pushes your total income higher, potentially into a higher tax bracket — but only the income above each bracket threshold is taxed at the higher rate, not all of your income. If you're in the 22% bracket and OT pushes $500 into the 24% bracket, only that $500 is taxed at 24%, not your entire paycheck.
FICA: Social Security and Medicare on OT
FICA taxes apply to overtime the same as regular wages. Social Security is 6.2% up to the 2025 wage base of $176,100. Once your total wages exceed this threshold, you stop owing Social Security on additional earnings — including overtime. Medicare at 1.45% has no wage cap. An Additional Medicare Tax of 0.9% applies to wages over $200,000 (single) or $250,000 (MFJ), but most hourly workers don't reach these thresholds.
FLSA Exemptions: Who Doesn't Get Overtime?
Not all employees are entitled to overtime. FLSA "white-collar" exemptions apply to executive, administrative, professional, and outside sales employees who meet specific duties tests AND earn at least $684 per week ($35,568 per year) as of 2025. The key is BOTH the salary threshold AND the duties test — meeting just the salary floor is not enough for exemption. Many employees are incorrectly classified as exempt; if you believe this applies to you, the Department of Labor provides guidance.
Strategic Timing: When Does OT Actually Help?
Whether to work overtime depends on your marginal tax rate, your financial goals, and whether you're near the Social Security wage base. If you're a high earner already past the $176,100 SS cap, overtime is effectively less costly from a FICA perspective. If you're near a bracket boundary (e.g., the 22%/24% threshold), even a few extra OT hours could push a small amount of income into a higher bracket. The Scenario Analysis tab shows you exactly how net pay changes as OT hours increase.