How to Calculate Overtime Differential

by Alia Nikolakopulos ; Updated July 27, 2017

When you work hours in excess of the standard work period, you are due additional pay for working overtime. The U.S. Department of Labor requires that all non-exempt employees receive overtime pay for excess hours worked, even if the employee is on a fixed salary. The difference between your regular rate of pay and your overtime rate of pay is called a differential.

Step 1

Calculate your total hours worked based on your employer’s system. Most employers use a standard 40 hour system, meaning you have overtime hours if you work more than 40 hours in a week. Hospital and certain nursing facilities, however, may use the “8 and 80” overtime system. Under this system, you have overtime if you work more than eight hours in a day or more than 80 hours within a 14-week period.

Step 2

Determine your regular rate. If you are paid a set hourly rate, your regular rate is the amount you are regularly paid per hour. If you are a salaried employee or receive a set amount of pay per work period, divide the amount by the total hours you work. For example, if you work 48 hours during the week and are paid a set amount of $500 per week, your regular rate is $10.42 per hour ($500/48).

Step 3

Multiply your regular hours by the regular rate. If you are on a 40-hour system, multiply 40 hours by your regular rate. The result is your total regular pay.

Step 4

Determine your overtime rate. Most employers use a 1-1/2 times rate. Multiply your regular pay rate by the overtime differential. For example, if your regular pay rate is $10.42 and your overtime differential is 1-1/2, multiply $10.42 by 1.5. If your employer uses a double time rate, multiply your regular rate by two. The result is your overtime rate. In this scenario, the overtime rate is $15.63.

Step 5

Multiply hours in excess of your employer’s hour system by your overtime rate. The result is your total overtime pay.

Step 6

Add the sum of your total regular pay and your total overtime pay to determine your gross pay for the period.

About the Author

With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.