Overtime Impact on Yearly Salary

Under the Fair Labor Standards Act (FLSA), non-exempt employees earn 1.5x their regular hourly rate for hours over 40 per workweek (29 USC §207(a)). Five hours of OT per week at $25/hr regular adds 5 x $37.50 x 52 = $9,750 to annual gross. Ten hours of OT per week at $25/hr regular adds $19,500. The OT premium is the 0.5x bonus above the regular rate (1.5x minus 1.0x).

Non-exempt employees are entitled to FLSA minimum wage and overtime protections. Exempt employees (typically executive, administrative, professional, or outside sales) are not. The federal salary threshold for exempt status in 2026 is $35,568 per year ($684 per week). The DOL 2024 Final Rule that would have raised it to $58,656 was vacated in court in November 2024, and the DOL republished the $684/week level by technical amendment in May 2026. A worker earning below this threshold is generally non-exempt regardless of job duties; a worker above it must also pass the executive, administrative, or professional duties test. California sets a higher bar ($70,304 per year in 2026). Check current DOL guidance for your state.

Only if they are non-exempt. The FLSA test has both a salary basis (must be paid on salary basis at or above the threshold) and a duties test (job duties must qualify as executive, administrative, professional, outside sales, or computer worker). A salaried worker below $35,568 ($684 per week) is generally non-exempt and entitled to OT. A salaried worker above the threshold whose duties do NOT meet the executive/admin/professional test is also non-exempt.

Yes. California Labor Code 510 requires 1.5x for hours over 8 per day or 40 per week (daily or weekly OT, whichever produces more). Double-time (2x) applies over 12 hours per day or over 8 hours on the seventh consecutive workday in a workweek. California also has a higher exempt salary threshold ($70,304 per year in 2026, twice the $16.90 state minimum wage). Source: California Labor Code Section 510 and DIR Industrial Welfare Commission Wage Orders.

Overtime pay is taxed identically to regular wages: federal income tax (per IRS Publication 15-T withholding tables), Social Security 6.2%, Medicare 1.45%. There is no separate 'overtime tax bracket.' If your additional OT pushes you into a higher marginal federal bracket, only the portion above the bracket threshold is taxed at the higher rate. Some employers withhold OT at a flat 22% (supplemental rate) per IRS Pub 15-A; your year-end W-2 reconciles to total wages.