How to Calculate Overtime for Monthly Salary Employees

To calculate overtime for monthly salary employees, convert the monthly pay into a weekly figure, divide that by the number of hours the salary is meant to cover to get an hourly rate, and pay 1.5 times that rate for each hour worked beyond 40 in a single workweek. The federal formula is: monthly salary × 12 ÷ 52 ÷ weekly hours = regular hourly rate.¹ Before running the math, confirm the employee is actually entitled to overtime in the first place.

First, Confirm the Employee Is Non-Exempt

Not every salaried worker qualifies for overtime. The Fair Labor Standards Act splits employees into exempt (no overtime) and non-exempt (overtime required) categories using three tests, all of which must be met for the exemption to apply.²

Salary basis: the employee gets a guaranteed, predetermined amount each pay period that doesn’t shrink based on work quality or quantity.
Salary level: pay meets the federal minimum weekly salary.
Duties: primary duties fit an executive, administrative, or professional category.

Fail any one test and the employee is non-exempt, no matter what the job title says.³

The current salary threshold is the trip-wire. In 2024 the Department of Labor issued a rule that would have raised the minimum exempt salary to $1,128 per week ($58,656 annually) starting January 1, 2025. A federal court struck the rule down in November 2024, and the DOL reverted to the 2019 threshold of $684 per week, or $35,568 per year.⁴ A monthly salary below roughly $2,964 (the monthly equivalent of $684 per week) almost certainly means the employee is non-exempt, even if the duties look executive or professional.

Overtime Is Measured Weekly, Not Monthly

This is the biggest pitfall for monthly-paid workers. Overtime is calculated on a workweek basis: a fixed, recurring block of seven consecutive 24-hour days (168 hours total) that the employer sets in advance.⁵ The workweek can begin on any day, but once set it stays consistent.

Each workweek stands alone. An employer cannot average hours across weeks to escape overtime. If someone works 50 hours one week and 30 the next, they are still owed 10 hours of overtime for the first week; the light week doesn’t cancel it out. Adding all the hours in a month and dividing by four produces the wrong answer every time.

Convert the Monthly Salary to an Hourly Rate

Federal regulation lays out the conversion in three steps.¹

Step 1. Multiply the monthly salary by 12 for the annual figure. A $5,000 monthly salary = $60,000 per year.
Step 2. Divide the annual figure by 52 for the weekly equivalent. $60,000 ÷ 52 = $1,153.85 per week.
Step 3. Divide the weekly figure by the number of hours the salary covers. For a standard 40-hour week: $1,153.85 ÷ 40 = $28.85 per hour.

If the employment agreement specifies a different base, such as 37.5 hours, use that number as the divisor. A smaller divisor produces a higher hourly rate, and a higher overtime premium.

Apply the 1.5x Multiplier

Once you have the regular hourly rate, multiply by 1.5 to get the overtime rate, then multiply by the number of overtime hours worked in the week.³

Working through the $5,000 monthly example, assuming the employee logs 45 hours in one workweek:

Regular hourly rate: $28.85
Overtime rate: $28.85 × 1.5 = $43.28
Overtime hours: 5
Overtime pay: 5 × $43.28 = $216.40
Total gross pay for the week: $1,153.85 + $216.40 = $1,370.25

Run the same calculation separately for each workweek in the pay period. On a monthly pay cycle that usually means four or five distinct workweek calculations feeding into one paycheck.

Add Bonuses and Commissions Before You Calculate

The regular rate is not just base salary. It includes nearly all compensation earned for work, and leaving components out produces an artificially low hourly figure. Nondiscretionary bonuses, shift differentials, and commissions all have to be folded in.⁶

Commissions count regardless of how often they’re paid — weekly, monthly, quarterly — and regardless of whether they supplement a base salary or stand alone.⁶ When a bonus or commission spans a period longer than one workweek, the employer allocates it back to the workweeks in which it was earned and recalculates overtime for each of those weeks.

Some payments are excluded from the regular rate: gifts and holiday bonuses not tied to hours worked, vacation and sick pay, truly discretionary bonuses (where both timing and amount are at the employer’s discretion), and employer contributions to retirement or health plans.⁷ A bonus labeled “discretionary” still counts if the employer promised it in advance or if employees have come to expect it as a regular part of pay.

When the Salary Covers More Than 40 Hours

Some employers set a salary intended to cover a workweek longer than 40 hours. That does not eliminate the overtime obligation. Divide the salary by the agreed number of hours (say, 45) to find the regular rate. Because the straight-time pay for the extra hours is already inside the salary, the employer owes only an additional half-time premium for each hour over 40, not the full time-and-a-half.⁸

The Fluctuating Workweek Method

If hours genuinely vary week to week (50 one week, 35 the next) and both parties clearly understand that the fixed salary covers all hours worked in any given week, the employer may use the fluctuating workweek method.⁹

Under this method, the regular rate shifts each week because the same salary is spread over a different number of hours. In a 50-hour week with a $1,000 weekly salary, the regular rate is $20 ($1,000 ÷ 50), and the overtime premium is $10 per hour (half of $20) for the 10 overtime hours — an extra $100. The method requires that the salary stay fixed regardless of hours, meet minimum wage in the longest weeks, and rest on a clear mutual understanding. If any condition fails, the standard time-and-a-half calculation applies.

Two Situations That Change the Answer

Daily Overtime States

Federal law only triggers overtime after 40 hours in a workweek, but a handful of states — including Alaska, California, and Nevada — also require overtime after 8 hours in a single day. In those states, daily overtime can be owed even in weeks with fewer than 40 total hours. Check your state labor department for the specific rule.

Unauthorized Overtime Still Gets Paid

An employer must pay for any hours the employee was “suffered or permitted” to work, even if the overtime was never requested or approved.¹⁰ If a manager knows an employee is staying late or working through lunch and doesn’t stop it, those hours count. The employer can discipline the employee for breaking a no-overtime policy, but it still must pay for the time.

Check the Math on Your Pay Stub

Pay stubs should separate regular earnings from overtime, showing the regular rate, the number of overtime hours, and the premium paid. If yours lumps everything into a single line, ask payroll for an itemized breakdown. Errors are far easier to spot when the numbers are broken out.

Employers must keep payroll records for at least three years and supporting documents like time cards for at least two.¹¹ If you think your overtime is being miscalculated, keep your own log of start and stop times, including any remote work or work through lunch. Personal records become critical evidence if you later need to file a wage claim, especially if the employer’s records are incomplete.

If the numbers don’t add up, you can file a complaint at no cost with the DOL Wage and Hour Division online or by calling 1-866-487-9243, and a field office will contact you within two business days.¹² You can also file a private lawsuit to recover unpaid overtime plus an equal amount in liquidated damages and attorney’s fees. The deadline is generally two years from each missed payment, or three years if the violation was willful.¹³

1
eCFR. 29 CFR 778.113 – Salaried Employees – General
2
eCFR. Part 541 – Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Computer and Outside Sales Employees
3
Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours
4
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption From Minimum Wage and Overtime Protections Under the FLSA
5
eCFR. 29 CFR 778.105 – Workweek as Basis for Applying Section 7(a)
6
eCFR. 29 CFR 778.117 – Commission Payments – General
7
U.S. Department of Labor. Fact Sheet 56A – Overview of the Regular Rate of Pay Under the FLSA
8
U.S. Department of Labor. Fact Sheet 23 – Overtime Pay Requirements of the FLSA
9
eCFR. 29 CFR 778.114 – Fluctuating Workweek Method of Computing Overtime
10
U.S. Department of Labor. Handy Reference Guide to the Fair Labor Standards Act
11
U.S. Department of Labor. Fact Sheet 21 – Recordkeeping Requirements Under the FLSA
12
Worker.gov. Filing a Complaint With the U.S. Department of Labor’s Wage and Hour Division
13
Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations