How to Calculate Overtime Pay in the U.S. 2026 – The Latest Overtime Pay Regulations Every New Immigrant Should Know

For workers who have just arrived in the United States through employment visa programs such as EB-3, understanding how overtime pay is calculated is not only a way to protect their rightful entitlements but also the foundation for long-term financial planning. The year 2026 marks several important changes in federal wage policy, especially the new tax deduction rules under the One Big Beautiful Bill Act (OBBBA), which has now taken effect. The following article by Newland USA provides a comprehensive overview of the calculation formula, exemption thresholds, the differences between federal and state regulations, along with practical notes for the Vietnamese community newly settling in the United States.

1. An overview of overtime pay under U.S. law

In the United States, compensation for work performed beyond standard hours is governed by the Fair Labor Standards Act (FLSA), which has been in effect since 1938. This is the foundational legal document that establishes standards for minimum wage, working hours for minors, and pay rules for work exceeding standard hours on a nationwide federal level. Under U.S. labor law, the standard workweek is defined as 40 hours within a calendar week (seven consecutive days, equivalent to 168 hours).

A key point to remember: employees classified as “non-exempt” must be paid at least 1.5 times their regular rate of pay for every hour worked beyond 40 hours in a single week. This payment is commonly called “time-and-a-half” – a phrase every worker in the United States should know. Federal law does not require additional pay for weekend, night, or holiday hours, unless the total number of hours worked in the week exceeds the 40-hour threshold.

For Vietnamese workers who have just completed the process of settling in the United States through the EB-3 program or other employment-based visa categories, correctly understanding the concept of “regular rate of pay” is the first and most important step. This is not simply the base hourly rate written in the contract; it is the total weekly earnings divided by the total number of hours actually worked.

2. Distinguishing between “exempt” and “non-exempt” employees – Who is entitled to overtime pay?

One of the most confusing aspects of U.S. labor law is determining who is eligible for overtime. Broadly speaking, the workforce is divided into two main groups:

The non-exempt group includes the majority of hourly workers, including those employed in manufacturing, construction, restaurants, services, basic healthcare, and retail. This is also the group that represents a large proportion of newcomers to the United States under the EB-3 program. This group is fully protected by overtime pay regulations in the U.S.

The exempt group typically consists of salaried employees who hold executive, administrative, or professional roles – also known as the EAP group (Executive, Administrative, Professional). To be classified into this group, a worker must simultaneously meet three tests:

• Salary-basis test: Paid on a fixed salary basis, with no deductions for variations in the quantity or quality of work performed.
• Salary-level test: A minimum salary of USD 684 per week (equivalent to USD 35,568 per year) according to the 2026 federal standard.
• Duties test: The nature of the work must be primarily managerial, executive, or require specialized expertise.

It should be noted that the proposed rule raising the exempt salary threshold to USD 844 per week, which was issued by the U.S. Department of Labor in 2024, was struck down by the U.S. District Court for the Eastern District of Texas in November 2024. As a result, the figure of USD 684 per week remains the standard benchmark applicable in 2026.

3. The standard formula for calculating overtime pay under the FLSA

The basic calculation formula is very simple:

Overtime Pay = (Regular Rate of Pay × 1.5) × Number of overtime hours

Or, put another way: total weekly earnings are divided into two parts – regular pay for the first 40 hours calculated at the standard rate, and pay for hours exceeding that threshold calculated at 1.5 times the regular rate.

Illustrative example 1 – A simple case: Mr. Minh, an auto assembly worker in Ohio under the EB-3 program, earns USD 20 per hour. Last week, he worked 48 hours. His income is calculated as follows:

• Pay for the first 40 standard hours: 20 × 40 = USD 800
• Overtime rate: 20 × 1.5 = USD 30 per hour
• Pay for 8 overtime hours: 30 × 8 = USD 240
• Total weekly income: 800 + 240 = USD 1,040

Illustrative example 2 – A case involving a non-discretionary bonus: Ms. H works at a food processing plant with a base pay of USD 600 per week for 40 hours, plus an attendance bonus of USD 100. If she works an extra 5 hours:

• Total gross earnings: 600 + 100 = USD 700
• Adjusted regular rate: 700 ÷ 40 = USD 17.50 per hour
• Overtime rate: 17.50 × 1.5 = USD 26.25 per hour
• Overtime pay: 26.25 × 5 = USD 131.25

The key point here: mandatory bonuses (such as production bonuses, attendance bonuses, or safety bonuses) must be added to “total remuneration” before the regular rate is calculated. On the other hand, holiday gifts, discretionary bonuses given by the employer, or expense reimbursements are not included.

4. Differences between federal and state regulations on overtime pay in the U.S.

One of the most complex aspects of the U.S. labor law system is the overlap between federal and state laws. The unbreakable principle: when both apply, the employer must comply with whichever provision is more favorable to the worker.

California is one of the strictest states. In addition to the 40-hour-per-week threshold, California applies daily overtime rules. Workers are entitled to 1.5 times their regular pay for working more than 8 hours per day, and double time when working more than 12 hours per day or on the seventh consecutive day of the week. The exempt salary threshold in California in 2026 has been raised to USD 1,352 per week – nearly double the federal level.

Colorado applies an EAP salary threshold of USD 1,111.23 per week effective January 1, 2026, under the COMPS Order. This state also has additional criteria for information technology employees that go beyond federal regulations.

Washington sets the minimum salary for EAP exemption at USD 1,541.70 per week in 2026 – the highest among all states. This threshold is calculated at 2.25 times the state minimum wage.

New York sets its exempt salary threshold by geographic area: New York City as well as Nassau, Suffolk, and Westchester counties apply higher levels than the rest of the state (USD 1,199.10 per week for the remaining regions).

Alaska and Nevada also apply daily overtime (more than 8 hours per day), similar to California. Kansas has a higher weekly threshold of 46 hours, but businesses falling under FLSA coverage must still comply with the federal 40-hour threshold.

As of 2026, 30 states and the District of Columbia apply a minimum wage higher than the federal rate of USD 7.25 per hour. This means that overtime pay in these areas is generally significantly higher than the overall average.

5. New regulations in 2026 – Overtime tax deduction under the OBBBA

This is a landmark change that every worker, especially those in the newly arrived immigrant community, should pay particular attention to. The One Big Beautiful Bill Act (OBBBA, HR 1), signed into law by the President in July 2025, introduced a federal tax deduction mechanism for “qualified overtime compensation” for tax years 2025 through 2028.

According to guidance issued by the Internal Revenue Service (IRS) in Notice 2025-69:

• Workers may deduct up to USD 12,500 per year for single filers, or USD 25,000 per year for married couples filing jointly.
• The deduction applies only to the “premium” portion – that is, the half (0.5) portion of the “time-and-a-half” formula, not the full amount of overtime pay.
• The benefit begins to phase out when adjusted income exceeds USD 150,000 per year (single) or USD 300,000 per year (married).
• Both taxpayers using the standard deduction and those who itemize are eligible for this benefit.

A concrete example: If you were paid USD 15,000 in overtime in 2025 at time-and-a-half, the deductible portion is calculated as 15,000 ÷ 3 = USD 5,000. This is the “premium” portion considered qualified overtime.

An important note: overtime earnings are still subject to regular federal income tax withholding, Social Security (6.2%), Medicare (1.45%), and state taxes where applicable. The OBBBA only creates a deduction mechanism at the time of year-end tax filing – it is not an exemption applied at the moment of payment.

Starting from tax year 2026, employers are required to report qualified overtime compensation separately on Form W-2, 1099-NEC, and 1099-MISC. Box 12 will include new codes: TT for overtime and TP for tips.

6. Special cases in overtime pay calculation

Employees working multiple jobs at different rates: When a worker holds two positions with different pay rates under the same employer (for example, serving as both a waiter and a bartender at a restaurant), the “blended rate” method is applied. Total weekly earnings are divided by the total number of hours worked to arrive at an average regular rate, which is then multiplied by 1.5 for hours worked beyond 40.

Commissioned employees: Under Section 7(i) of the FLSA, retail or service employees working on commission may be exempt from overtime if they meet two conditions: (1) more than 50% of their earnings must come from commissions during a reference period of at least one month, and (2) their average pay must exceed 1.5 times the federal minimum wage. Opinion Letter FLSA2026-4 issued on January 5, 2026, by the Department of Labor clarified that the calculation uses the federal minimum wage (USD 10.88 per hour) rather than the state minimum wage.

Piece-rate employees: Total piece-rate earnings plus mandatory bonuses, divided by the total number of hours worked, yields the regular rate used to calculate overtime.

Compensatory time off (comp time): This is applied mainly to government employees, at a rate of 1.5 hours of time off for each overtime hour worked, instead of being paid in cash.

7. Rights and complaint procedures when overtime regulations are violated

Workers must be clearly aware that failing to be paid overtime correctly in the U.S. is a serious violation of U.S. labor law. Reports from the U.S. Department of Labor show that nearly 85% of all FLSA violations relate to overtime – an alarming statistic.

When a violation is discovered, workers can:

• File a complaint with the Wage and Hour Division (WHD) of the U.S. Department of Labor – this service is free and identities are kept confidential.
• Contact the State Department of Labor – this is particularly effective in California, New York, and Washington, where strong worker protection mechanisms are in place.
• File a civil lawsuit within 2 years (or 3 years in cases of willful violation) to recover unpaid wages, plus an equivalent amount in “liquidated damages.”
• Consult an employment law attorney – many law offices operate on a “no win, no fee” basis.

Employers who commit willful or repeated violations may face civil penalties of up to USD 1,000 per violation, in addition to potential criminal liability in serious cases.

Members of the Vietnamese community who have recently moved to the U.S. sometimes hesitate to file complaints due to language barriers or concerns that it might affect their visa status. It must be emphasized: the FLSA protects all workers regardless of immigration status, and employers are strictly prohibited from retaliating against anyone who files a complaint.

8. Notes for Vietnamese newcomers to the U.S.

Finally, here are some recommendations specifically for families just beginning their life in the United States:

Keep your own personal work records: Record the exact times you clock in and out, the number of hours worked each week, and copies of your pay stubs. This is crucial evidence in the event of a dispute.

Check your employment classification: Don’t rely on a job title. An “assistant manager” may still belong to the non-exempt group if they do not pass the duties test. Compare your role against the three tests described above.

Understand your own workweek: Each employer may define “workweek” differently (for example, Sunday to Saturday, or Monday to Sunday). Overtime is calculated on a weekly basis, and hours cannot be averaged or offset across different weeks.

Pay attention to “off the clock” hours: Any activity that serves work – preparation, cleaning up, attending meetings outside regular hours – must be paid for. The law strictly prohibits requiring work that is not recorded.

Take advantage of OBBBA tax benefits: When filing your 2025 taxes (which are due in 2026), carefully check Box 12 on your W-2 to identify qualified overtime and apply the deduction. In many cases, this can result in savings of thousands of dollars.

Consult professionals: Given the complexity of the federal and state tax and labor system, consulting a CPA or an immigration attorney with labor law expertise is a worthwhile investment during your first year of settlement.

9. Conclusion

Mastering how to calculate overtime pay is not merely a matter of financial literacy; it is also an essential tool that enables Vietnamese newcomers to confidently integrate into the U.S. labor market, protect their rightful entitlements, and optimize their income. With the important changes taking effect in 2026, the opportunity to increase take-home income for workers is significant. The U.S. labor law system, built on the foundation of the FLSA, is designed to protect workers, but these rights can only be exercised when the people involved understand them and actively claim them. For the EB-3 worker community in particular, and the Vietnamese community building a new life in the United States in general, investing time in understanding overtime pay regulations in the U.S. is a solid first step for the long journey ahead.

Learn more:

• Workers’ Compensation Insurance in the U.S.: Important Things Immigrant Workers Need to Know
• EB3 Immigration to the US: Can Your Spouse and Children Come Along?
• How Much Does EB3 Skilled Worker Immigration to the US Cost? A Complete Financial Preparation Guide from A to Z
• Sending Your Children to School in America: What New Immigrant Parents Need to Know