Worked Example: Calculating Hourly Paycheck With Overtime (Step-by-Step)

If you've ever stared at your pay stub trying to figure out why your take-home is what it is, this walkthrough is for you. We'll calculate a real hourly paycheck step-by-step using the hourly paycheck calculator, showing every deduction along the way.

The Scenario

Maria earns $18.00 per hour at a warehouse. Last week she worked 45 hours — 40 regular hours plus 5 overtime hours. She's paid bi-weekly (every two weeks). Her employer withholds 12% federal tax, 5% state tax, and the standard FICA (7.65%) applies. She has no additional deductions.

Step 1: Calculate the Regular Pay

For 40 regular hours per week at $18.00/hour, Maria's weekly regular pay is:

40 hours × $18.00 = $720.00/week regular pay

Over a bi-weekly pay period (2 weeks), that's:

$720.00 × 2 weeks = $1,440.00 regular pay per paycheck

Step 2: Calculate the Overtime Pay

Under federal FLSA, overtime is paid at 1.5x the regular rate for hours over 40 in a single workweek. Maria's overtime rate is:

$18.00 × 1.5 = $27.00/hour

For 5 overtime hours per week, her weekly overtime pay is:

5 hours × $27.00 = $135.00/week overtime pay

Over a bi-weekly pay period:

$135.00 × 2 weeks = $270.00 overtime pay per paycheck

Step 3: Calculate Gross Pay Per Paycheck

Add regular + overtime:

$1,440.00 + $270.00 = $1,710.00 gross pay per bi-weekly paycheck

Step 4: Calculate Annual Gross Pay

A bi-weekly pay period means 26 paychecks per year:

$1,710.00 × 26 = $44,460.00 annual gross pay

Step 5: Calculate Each Deduction

Each deduction is calculated as a percentage of the bi-weekly gross ($1,710.00):

Deduction	Rate	Amount Per Paycheck
Federal tax	12%	$205.20
State tax	5%	$85.50
FICA (Social Security + Medicare)	7.65%	$130.82
Total deductions	24.65%	$421.52

Step 6: Calculate Net Take-Home Pay

$1,710.00 (gross) − $421.52 (deductions) = $1,288.48 net take-home per paycheck

Annualized:

$1,288.48 × 26 = $33,500.48 annual net take-home pay

Step 7: Calculate the Effective Hourly Rate

Maria's effective hourly rate (what she actually keeps per hour worked) is:

$33,500.48 / (45 hours × 52 weeks) = $33,500.48 / 2,340 = $14.32/hour effective take-home

Even though her nominal rate is $18.00/hour, after taxes and deductions she keeps $14.32 per hour worked — about 79.6% of her nominal rate.

Try It Yourself

Enter Maria's numbers into the hourly paycheck calculator to verify these results:

• Hourly rate: $18.00
• Regular hours per week: 40
• Overtime hours per week: 5
• Pay frequency: Bi-weekly
• Federal tax %: 12
• State tax %: 5
• FICA: enabled

You should see $1,288.48 per paycheck and $33,500.48 annual net. The calculator also shows the effective hourly rate of $14.32/hour.

Key Takeaways

• Overtime at 1.5x adds significant gross income — $135/week becomes $7,020/year in this scenario
• Taxes consume about 24.65% of gross pay at Maria's income level
• The effective hourly rate ($14.32) is the number that matters for budgeting, not the nominal rate ($18.00)
• The marginal tax rate (what Maria pays on her next dollar of income) is 12% federal + 5% state + 7.65% FICA = 24.65%

Common Mistakes to Avoid

1. Forgetting FICA — many workers underestimate their deductions by forgetting Social Security (6.2%) and Medicare (1.45%) total 7.65%
2. Using gross for budgeting — always budget with net take-home, not gross pay
3. Miscounting pay periods — bi-weekly is 26 paychecks/year (not 24, which is semi-monthly)
4. Ignoring overtime in annual calculations — if you regularly work OT, include it in your annual gross projection

Related Calculators

• Hourly Paycheck Calculator — full paycheck with overtime and taxes
• Overtime Calculator — overtime-only calculation
• Time-and-a-Half Calculator — quick 1.5x rate calculation
• Wages Calculator — hourly to annual conversion
• FICA Tax Calculator — Social Security + Medicare breakdown