How to Calculate Double Pay: A 2025 Guide for Employees

At this stage, there is no detailed proposal, and the fiscal impact of the policy would depend on the specific policy. For example, if only the 50 percent additional portion of overtime pay was excluded from taxation, revenues would fall by $227 billion over 10 years, according to Tax Foundation. If no tax on overtime was broadly construed to exclude all pay related to working more than 40 hours a week, Tax Foundation estimates revenues would decrease by $3.1 trillion over 10 years.

What is the no tax on overtime bill in California?

• If policymakers pursue no tax on overtime, it should be accompanied by other reforms to the tax system and the federal budget that align with principles of fiscally responsible tax reform and improve the fiscal outlook.
• In the meantime, HR professionals should brace for questions from staff.
• States with a state income tax, like Oklahoma, may still have the possibility of paying state income taxes on overtime.
• To calculate overtime for a salaried employee, you must take the annual hours worked, 2,080 hours, and divide the income by it to get an hourly rate.
• Though it initially ruled that overtime didn’t kick in until an employee had worked 44 hours a week, lawmakers amended the FLSA two years later to reflect the move to a 40-hour workweek, lowering the threshold for overtime pay.
• But that extra pay is taxed like regular income, often at a higher marginal rate, shrinking the take-home boost.

Additionally, the actual revenue loss from the proposal could be even greater than current estimates, depending on the extent to which workers and employers modify their behaviors because of the new opportunity for tax savings. For Keep Records for Small Business example, an employer may be incentivized to switch a salaried, FLSA-exempt employee who regularly works more than 40 hours a week to an hourly wage that, with overtime, is equal to the employee’s current pre-tax income. Other employees might prefer taking overtime pay to receiving bonuses under this proposal. Those changes would result in savings for the employer as well as greater after-tax income for the employee. State law mandates overtime pay for non-exempt employees, typically 1.5 times the regular rate for hours over eight in a day or 40 in a week, and double time for hours over 12 in a day. The trend of tax exemptions on tips, overtime, and bonuses may sound like a win for workers, but it is a shortsighted fix with long-term drawbacks.

Different Types of Compensation Plans & Benefits

In those cases, workers can take up the issue with supervisors and/or human resources representatives and request clarification of the policy. When you want to see how much overtime pay you will earn, you can use this Overtime Calculator from the U.S. Department of Labor to help you determine if you’re eligible for overtime pay and to calculate how much overtime you will receive for a typical pay period. Check your state department of labor website for information on overtime rules in your location. With fewer people able to work, the department’s overtime costs skyrocketed. Melissa Camacho, an American Civil Liberties Union of Southern California senior staff attorney, represents inmates in two long-standing class-action lawsuits over conditions and abuse in the department’s jails.

FAQs: 2025 IRS tax refund – from accepted to approved

• Investigators recommend changes to ensure such violations don’t happen again.
• Workers in the 19th century regularly worked roughly 100 hours per week.
• However, Congress has no official deadline other than the Oct. 1 beginning of the fiscal year.
• Some workers, those who make salaries or get paid on a piece rate basis, will have to recalculate their regular rate every week to make sure they’re being paid overtime properly.

The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days. Overtime exists to disincentivize employers from overworking their employees. If a boss asks workers to put in more than 40 hours in a week, they must pay a premium—usually 1.5 times their regular rate of pay—for those excess hours. It was a policy choice made only after fierce struggle, organizing, and advocacy by workers who labored 60–80 hours a week in difficult and dangerous jobs. The federal overtime provisions are contained in the Fair Labor Standards Act (FLSA). Unless exempt, employees covered by the Act must receive overtime how much is overtime pay pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

No tax on overtime is ripe for abuse by high earners, straining public budgets while further complicating the tax code

National standards for overtime work were first outlined by the federal government in the Fair Labor Standards Act (FLSA) of 1938. A New Deal-era law, the FLSA established the national minimum wage, set overtime pay practices, and provided child labor protections. The act mandated that employees be paid at least one-and-a-half times their usual pay rate for hours worked beyond the standard work week (40 hours). Some working people are not covered by the overtime pay requirements – FLSA-exempt employees mostly include executive, administrative, and professional (EAP) employees. Generally, the EAP exemption applies to employees who are paid on a salary basis above a certain income threshold and whose duties meet certain tests. Proponents of such tax exemptions argue that they offer a lifeline to workers in low-wage and labor-intensive sectors.

Lawmakers in 19 states have proposed misguided “no tax on overtime” bills in 2025

• You’ll need their normal rate and the hours worked to determine the overtime pay for the period.
• “There is some small amount of money per day for incidentals that they end up being legally obligated to pay you,” she said.
• Some unions or individuals will negotiate collective bargaining agreements or employment contracts that prohibit employers from requiring overtime.
• Lawsuits regarding the 2024 final rule are currently pending in two other federal district courts, and the United States has filed a notice of appeal from the November 15 decision.
• Before Trump can sign the bill, the Senate will have to reconcile and agree upon it.

Since the FLSA defines a workweek as “any fixed and regularly recurring period of income summary 168 hours – seven consecutive 24-hour periods,” overtime can run as long as you need if you properly compensate employees for the additional time. Laws regarding exempt versus nonexempt status vary slightly from state to state, so check your state’s specific requirements. However, there are some basic federal overtime rules to which you must adhere when classifying your employees. The FLSA, with some exceptions, requires bonus payments to be included as part of an employee’s regular rate of pay in computing overtime. In some cases, the department’s staffing problems have sparked lawsuits.

Tech layoffs in 2025 spark fresh starts

The Fair Labor Standards Act requires employers to pay time and a half to any non-exempt employees who work more than 40 hours in a week. When an employee is entitled to overtime pay, the rate cannot be less than one and a half times (time and a half) an employee’s regular rate of pay. For example, if your hourly rate of pay is $10/hour, the overtime rate is $15/hour. Yes, overtime pay is currently taxed as regular income under both federal and state rules. California’s progressive tax brackets mean higher earners might lose more to taxes on overtime hours. Will overtime be taxed in 2025 under the status quo, or will California leap to enact new overtime tax laws?