How to Calculate Overtime in California

How much is overtime in California?

California law requires employers to pay an overtime rate of 1.5 times the regular rate of normal pay. These overtime rates will be paid to non-exempt employees who work over 8 hours a day or over 40 hours per week. This includes non-exempt employees paid on salary, piece rate, daily rate, or hourly basis.

Step 1: Differentiate Between Workdays and Workweeks

Workday

Non-exempt employees are entitled to overtime rates for hours worked over an 8-hour workday.

Under California overtime laws, a workday is defined as a consecutive 24-hour period starting at the same time each day. The employer can establish what they consider the workday to be. It is automatically set as 12:01 a.m. until midnight if they do not select one. Once an employer has established their workday, they cannot change it unless there is a legitimate business reason for the change.

Workweek

In California, non-exempt employees are entitled to overtime rates on any hours worked over a 40-hour workweek.

In California, a workweek is defined as seven consecutive days, starting on a workday of an employer’s choice. Different employees can have different workweeks within the same company. However, once an employee’s workweek has been established, the employer cannot change it to avoid paying overtime.

Companies and HR should consult an employer lawyer to ensure the company complies with overtime calculations.

Step 2: Total the Employee’s Hours For Each Workday and Each Workweek

Employees will track each shift’s start and end times and the breaks taken during those shifts. Employers can use these records to add the total hours worked for each workday and workweek. Any hours over 8 in a workday will be paid at the overtime rate. Any hours over 40 in a workweek will be paid at the overtime rate.

Beware that effective 2023, California overtime rate for agricultural employees is calculated differently.

Step 3: Calculate the Amount of Daily Overtime

California law requires all non-exempt employees to be paid daily overtime. The pay rate is:

• 1.5 times the regular pay rate – All hours worked between 8 and 12 a day, including the 12^th hour, are to be paid 1.5 times. This rate also applies to the first 8 hours an employee works on the 7^th consecutive day they worked in a workweek.
• Double the regular pay rate – All hours over 12 hours an employee works in a workday are to be paid at double their usual pay rate. This is not inclusive of the 12^th. This rate also applies to all hours over 8 hours an employee works on the 7^th consecutive day they worked in a workweek.

Example 1: Worked 4 days a week

An employee works four days a week. They worked a half-day on Tuesday and worked a longer shift on Thursday.

Example 2: Worked 6 Days a week

An employee worked six days a week, one longer than 8 hours. Because the employee worked 13 hours on Wednesday, they will receive overtime 1.5 times for 4 hours and double for 1 hour.

Example 3: Worked 7 days work workweek

An employee worked a seven-day workweek, two longer than 8 hours. The employee will receive 1.5 times for 4 hours due to the two longer days. They will also receive 6 hours at 1.5 times the pay due to working 6 hours on the 7^th consecutive day.

Step 4: Calculate the Amount of Weekly Overtime

California law requires employees to be paid overtime for any hours they work over 40 in any workweek.

• If the employee works 40 hours or less in a workweek, then they will receive no weekly overtime. They will still receive daily overtime for any workdays over 8 hours.
• If the employee has worked over 40 hours in a workweek, their overtime rate for the additional hours is 1.5 times their regular pay rate.

Please note the below examples will calculate overtime for the workweek only; it will not show overtime for longer workdays.

Example 1

Example 2

Example 3

Step 5: Compare Daily and Weekly Overtime

California employers must calculate both daily and weekly overtime hours for an employee. However, employers do not pay overtime twice for the same hours.

• When the daily overtime hours are equal to or more than the weekly overtime hours, the employer must use the daily overtime rules for that week. This is because all the weekly overtime hours are already calculated and paid.
• If the weekly overtime is more than the daily overtime hours, then the employer is to pay out additional weekly overtime hours along with the daily ones. The employer must ensure all daily hours paid at double time are paid out correctly.

Employers must be aware of daily overtime rules as some daily hours may need to be paid at double time, unlike weekly.

Example 1

In this example, because the total weekly hours are 40, the employer needs to calculate based on daily overtime rules. Therefore, the employee is due 38 hours at the regular pay rate and 2 hours at 1.5 times their regular rate.

Example 2

In this example, the employee worked 54 hours in the work week and worked more than 8 hours on four days. As the weekly overtime is more than the weekly hours, the employer will calculate the total overtime hours for the week and then add the hours paid at double time. Therefore, 40 hours will be paid at the standard rate, 10 hours will be paid at 1.5 times the rate, and 1 hour will be paid at double time.

Example 3

In this example, the employee did not work over 40 hours, but they worked 7 consecutive days in a workweek. Therefore, 30 hours will be paid at the standard rate. The first 8 hours of the seventh consecutive day will be paid at 1.5 the normal pay rate, and the subsequent 2 hours will be paid at double time.

Step 6: Determine the Employee’s Regular Rate of Pay

Overtime pay is calculated in relation to an employee’s standard pay rate. To work out an employee’s regular pay rate, they must work out their hourly pay rate, excluding any flat-rate bonuses. Here is how to calculate an employee’s regular pay rate based on earnings.

Hourly Non-Exempt Employees

Hourly workers are easy to calculate. Their regular pay rate is their hourly rate plus the hourly average of non-discretionary commissions and bonuses. Divide the non-discretionary commissions and bonuses by the hours worked and add them to the hourly rate.

Piece-Rate or Commission Employees

If the employee is paid on a piece basis or by commission, their hourly average will be worked out in the following way:

• The regular rate is the commission rate or piece rate and then is calculated based on the overtime rate.
• Alternatively, the employee’s total earnings for the work week could be divided by the total hours worked. The standard rate of pay then calculates the overtime hours.
• For piece workers, employers can use a group rate for overtime rates. The total production of the group is averaged per person. This is then divided by the hours an employee worked to get the standard pay rate.

Salaried Non-Exempt Employees

Non-exempt employees on a fixed salary are compensated for their usual hours, but the standard overtime rules still apply.

For full-time employees who work 40 hours per week, their weekly salary will be divided by 40 hours to calculate their regular hourly rate.

If a non-exempt employee is paid a weekly fixed salary, then calculate the regular rate of pay like this:

• Multiply monthly wage by 12 to get the salary for the year.
• Divide the year’s salary by 52 to get the weekly salary.
• Divide the weekly salary by the regular hours of work. This should not exceed 40 hours.

Step 7: Pay The Overtime Wages to an Employee

All overtime wages must be paid to employees on their standard payday after the payroll period it was earned. This is required by California law. If overtime pay is delayed by one payroll cycle, the regular hours must be paid on time.