Quick Answer: There's no federal legal limit on overtime hours. According to the Department of Labor, the FLSA doesn't cap how many hours team members aged 16+ can work—it only requires 1.5x pay for hours over 40 per week. The real limits come from your budget and team well-being. When overtime costs exceed 5% of labor costs, you're paying more than you're gaining.
How Do Overtime Laws and Costs Impact Your Business?
You might think overtime is just about paying time-and-a-half—but the real cost goes way beyond that 1.5x premium. Here's what you need to know about the rules and the hidden expenses.
The FLSA requires overtime pay at 1.5 times a team member's regular rate for all hours worked over 40 in a workweek. This applies to non-exempt hourly teams like servers, stylists, shift leads, and cashiers. The law doesn't limit total hours—just requires premium pay when thresholds are crossed.
Some states impose stricter rules. California requires overtime pay after 8 hours in a single day and double-time after 12 hours. When you operate in these states, comply with whichever law provides greater protection.
Here's where overtime really gets expensive: productivity decline, errors, and turnover. According to research published in Occupational and Environmental Medicine, productivity per hour drops sharply after 50 hours weekly. At 60 hours, productivity declines to approximately 66% of normal efficiency—the additional 20 hours produce minimal output while incurring premium wages. This is compounded by injury rates 37% higher at 12+ hours per day and burnout-driven turnover that costs $1,500–$5,000 per position to replace.
What Are the Warning Signs You're Scheduling Too Much Overtime?
If overtime feels like it's quietly eating into your margins, you're probably right. Here's how to spot the problem before it spirals.
Start with two key metrics. Monitor overtime as a percentage of total labor costs—anything above 5% signals a potential staffing problem. Additionally, if 20–30% of your team regularly works overtime, you're dealing with systemic understaffing rather than managing occasional demand spikes.
Watch for these red flags in your restaurant or salon:
- The same team members consistently clock 45+ hours weekly: That's not dedication; it's a scheduling gap you're paying premium wages to fill.
- Sick call-outs increase among your highest-hour workers: According to workforce research, companies with excessive overtime see 54% higher absenteeism rates.
- Customer complaints rise during extended shifts: Quality metrics decline with fatigue, and your customers notice.
- Burnout becomes visible: Research shows burnout risk increases 3.14 times among team members working regular overtime.
These patterns indicate systemic understaffing rather than temporary demand fluctuations.
Track weekly hours by team member and department. When patterns emerge—your closing shift lead always hits 50 hours, your Saturday stylists regularly exceed 45—those aren't scheduling quirks. They're staffing gaps costing you money.
How Does Homebase Help with Overtime Management?
Manual overtime tracking means catching problems after paying for them. Homebase's time clock automatically calculates overtime based on federal and state rules, while the scheduling tools show real-time labor costs and send alerts when team members approach overtime thresholds.
When payroll runs, Homebase payroll handles all overtime calculations and tax withholding automatically. Knowing when overtime costs too much starts with seeing it clearly—before it hits your bottom line.
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Sources and Methodology
At Homebase, we rely on up-to-date, authoritative sources to ensure every Question Center article provides accurate guidance for small business owners. We start with primary federal materials from the IRS and Department of Labor, verify details using official agency publications, and use reputable industry resources only to supplement—never replace—official law.
For this piece, we referenced DOL Fact Sheet #23 on the federal 40-hour overtime threshold and 1.5x pay requirements, the DOL Wage and Hour Division overtime guidance on federal limits, California DIR overtime FAQ for state-specific daily overtime rules, and peer-reviewed research from Occupational and Environmental Medicine on the relationship between overtime hours and workplace injury rates.