What is an Overtime Premium?

An overtime premium is the additional payment made to an employee for hours worked in excess of 40 hours per week. The amount of the overtime premium is typically 50% of the base pay level. In order to classify an overtime premium as such, there must be a contract between the employer and employee, where the hours worked are more than the amount required in the contract.

Example of Overtime Premium

As an example of an overtime premium, if a person normally earns $10 per hour and works 42 hours in a week, then her base pay will be $420 (calculated as 42 hours multiplied by $10/hour) and her overtime premium will be $10 (calculated as 2 hours multiplied by $5/hour).