Price covered overtime using the applicable wage base and multiplier, while treating employer fringe costs separately from that base. For covered federal work, Acquisition.gov states that in computing required overtime payments, which are 1 1/2 times the basic hourly rate of pay, the contractor shall use the basic hourly rate of pay in the wage determination, or the basic hourly rate actually paid by the contractor, if higher. This rule defines the first input for your bid labor rate: the specific wage amount subject to the overtime calculation. The second through fifth inputs involve benefit allocation, weekly thresholds, counted hours, and local wage floors.
Key takeaways
- Price planned overtime by separating the wage subject to the multiplier from employer costs.
- Use the applicable basic hourly rate for the 1.5 times calculation, then allocate benefit contributions separately based on actual worked hours.
- Verify whether your project falls under federal or state weekly thresholds before applying the rate.
The five inputs behind a bid labor rate
Five distinct inputs shape your overtime cost structure. Input one is the overtime wage base, which determines the hourly amount multiplied by 1.5. Input two is hourly benefit allocation, where employer contributions are converted into an hourly figure separate from the wage base. Input three is the weekly overtime threshold, which varies between federal and state rules. Input four is counted work hours, meaning only actual worked time triggers overtime, excluding leave days. Input five is the applicable wage floor, which may be set by industry, locality, or state minimums.
When pricing planned overtime hours in a bid, isolate these five elements before applying multipliers. The wage base drives the direct overtime premium, while benefits add to the total labor cost without being part of the multiplier calculation. Thresholds determine when those premiums activate, and counted hours ensure you do not overestimate based on scheduled rather than actual time. Wage floors protect against underpricing in jurisdictions with higher mandatory rates. By separating these inputs, you avoid conflating the base wage with fringe costs or misapplying a single threshold across different regulatory environments.
Record the specific wage base for each crew member before applying the multiplier. Confirm which weekly threshold governs your jurisdiction to avoid miscounting overtime hours. Keep employer fringe costs out of the base rate used for the 1.5 times calculation.
Separate the overtime wage base from employer fringe costs
The 22.406-2 Wages, fringe benefits, and overtime page on Acquisition.gov defines the basic rate of pay to include employee contributions to fringe benefits, but it excludes the contractor’s contributions, costs, or payment of cash equivalents for fringe benefits. This distinction matters because the overtime multiplier applies to the basic rate, not to the total cost an employer incurs per hour worked. If you add employer benefit payments into the base before applying the multiplier, you inflate the overtime premium beyond what the rule requires. Keep the two amounts in separate line items in your estimate so the multiplier touches only the wage component.
The same source sets a floor for how low that base can go. According to Acquisition.gov, overtime shall not be computed on a rate lower than the basic hourly rate in the wage determination. You cannot drop below the determined rate even if your internal payroll records show a different amount. This floor protects the integrity of the bid labor rate by ensuring the overtime premium is built on a compliant foundation. When preparing a bid, verify which wage determination applies to the specific project location and trade, then confirm your planned hourly wage meets or exceeds that basic rate before calculating any overtime hours. For more on this step, see public bid labor checks.
Published wage floors and overtime thresholds reference table
The following table compares the specific wage figures, overtime multipliers, and weekly hour thresholds published by state labor agencies. Each row cites the exact condition under which that figure applies, ensuring your bid rate reflects the correct jurisdictional floor and multiplier without mixing unrelated rules.
Use this reference to verify whether your project location triggers a higher local floor or a specific federal overlay before finalizing the labor cost line.
Allocate benefit costs across the hours they cover
The Acquisition.gov rule for FAR 22.406-2 Wages, fringe benefits, and overtime specifies how to convert employer fringe costs into a usable hourly figure for your estimate. You calculate the hourly cash equivalent by dividing the employer’s contributions or costs by the employee’s hours worked during the period covered by those costs or contributions. This method ensures that benefit expenses are allocated only to the actual time they cover, rather than being spread across unworked periods or incorrectly added to the basic wage rate.
When building your bid labor rate, identify the specific benefit items included in this calculation. Your divisor is strictly the employee’s hours worked during the relevant period. If an employee works forty hours in a week, the weekly benefit cost is divided by forty. If they work fifty hours, the same total cost is divided by fifty. Do not use scheduled hours or standard shift lengths if actual worked hours differ; the rule requires the hours actually worked during the period the costs cover.
Illustrative example: overtime base and benefit spread
Assume the wage determination lists a basic rate of 35 dollars per hour and the contractor actually pays 40 dollars. The higher figure, 40 dollars, is the overtime base, so each overtime hour is priced at one and a half times 40, or 60 dollars. Assume 480 dollars of weekly employer benefit cost is spread over 60 hours actually worked, which adds 8 dollars per hour. The 8 dollars stays on its own line and never enters the 60-dollar premium.
Calculate the rate using the applicable weekly threshold
Overtime is based on actual hours worked in a seven-day workweek, so holiday hours, vacation time and sick leave are not counted, according to Minnesota Department of Labor and Industry. Most employees must be paid 1.5 times their usual hourly rate for all hours worked over 40 per week, according to Maryland Department of Labor. Record the specific weekly threshold that applies to your crew before calculating the multiplier.
Adjust the estimate for hours counted and local wage floors
Check the project locality before applying a statewide floor. The California Department of Industrial Relations notes that some cities and counties have higher minimum wages than the state’s rate, so a bid must use the higher applicable figure rather than assuming the state number covers the site California Department of Industrial Relations. For employers not otherwise covered by a higher industry or locality-specific minimum wage, the effective January 1, 2026 minimum wage is $16.90 per hour. Unless another exemption applies as detailed in question 4 of their guidance, employers must pay all employees at least the minimum wage per hour. This qualification means the estimate cannot treat the statewide figure as a universal cap; it functions as a baseline that specific industry or local rules may supersede. For related wage rules, see public bid pricing wage provisions.
Nevada presents a different structural adjustment. The Nevada Office of the Labor Commissioner states that Ballot Question 2, passed in November 2022, eliminates the two-tier minimum wage as of July 1, 2024 Nevada Office of the Labor Commissioner. When pricing overtime hours for a Nevada project, the estimator should verify whether the single-rate structure fully applies to the specific trade and location. Do not assume the prior two-tier distinctions persist after the stated elimination date.
Apply these jurisdiction-specific floors to the actual worked hours counted in the overtime calculation. Record the specific city or county rate in the bid assumptions to avoid using a lower statewide figure that does not match the project site. Next step today: confirm whether the employer is subject to an industry-specific wage determination that might also exceed the general local floor.
Related guides: Construction estimate audit: 5 inputs before a bid · Construction material cost line: 3 sourced checks.
Questions on construction overtime assumptions in a bid
How is construction overtime cost built into a bid rate?
According to Acquisition.gov, the contractor uses the basic hourly rate of pay in the wage determination or the basic hourly rate actually paid by the contractor, if higher. The basic rate includes employee contributions to fringe benefits but excludes the contractor’s contributions, costs, or payment of cash equivalents for fringe benefits.
Does Minnesota's forty-eight-hour threshold apply if my business is also covered by the federal forty-hour rule?
Federal law may require payment after 40 hours even when Minnesota law requires it only after 48 hours.
What fringe benefit costs are excluded from the federal basic overtime rate?
Contractor contributions, costs, or payment of cash equivalents for fringe benefits are excluded from the basic rate, according to Acquisition.gov.
How do I convert employer benefit costs into an hourly estimate input?
Divide the employer's contributions or costs by the employee's hours worked during the period covered, according to Acquisition.gov. This method isolates the benefit cost per hour for estimation purposes.
Does California's statewide minimum wage apply when the project locality has a higher rate?
The state floor does not override a higher applicable industry or local wage. The California Department of Industrial Relations notes that effective January 1, 2026, the minimum wage is $16.90 per hour for all employers, not otherwise covered by a higher minimum wage specific to an industry or a locality. Some cities and counties have higher minimum wages than the state’s rate, which must be respected in your estimate.