Taking care of employee payroll is essential for running a successful business, and this means understanding the industry jargon inside out. That’s why knowing the answer to the question, “What is time and a half?” should be on your to-do list.
In essence, time and a half is a term related to overtime pay. It refers to the extra payment that you owe to your employees for any hours they have worked above the 40-hour week. The standard overtime pay is time and a half the regular hourly payment.
In the sections below, you can find out the basics about time and a half, who you owe it to, and how to calculate it.
What Is Time And A Half?
Time and a half refers to the amount of extra payment that employees working overtime are entitled to receive. The requirements and conditions for overtime pay are set in the federal Fair Labor Standards Act (FLSA).
The rate for overtime work is 1.5x a worker’s hourly rate. In other words, the regular rate of pay plus another 50%.
In the typical case of an hourly or non-exempt employee, if you are paying Sandy $14 per hour, you would have to pay her 1.5 x $14 = $21 per hour for every overtime hour.
Time and a half pay is due for any hours over the standard 40-hour workweek for employees that qualify for overtime pay under the FLSA.
When Are You Required To Pay It?
You have to pay the time and a half rate for overtime hours to all of your hourly or non-exempt employees under the FLSA. If you fail to do so, you can end up with a lawsuit and a hefty bill. You may also have to provide back pay to your staff, as well as damages and legal fees.
To understand who you owe for overtime, you have to differentiate between exempt and non-exempt employees.
Exempt workers are not covered by the FLSA and aren’t entitled to overtime pay.
- They are typically salaried workers rather than hourly ones.
- They occupy specific job positions that are exempt from the FLSA. These include roles that pertain to the high-level management of a business, such as administrative, executive, IT, etc.
- Their annual pay is above $35,568 (for 2020).
- Sales personnel conducting work away from your official business location are also usually considered exempt without having to meet a minimum payment requirement.
- Some hourly employees can be considered exempt from the FLSA. These include certain positions in the food industry, such as truck drivers, agricultural workers, and theater and film employees.
Non-exempt workers, on the other hand, are included in the FLSA. You owe them time and a half pay for overtime hours.
- They are usually hourly employees. However, they may also be salaried in some cases.
- Their annual pay is below $35,568 (for 2020).
- Their job positions are non-exempt, meaning that they don’t have high-level administrative, executive, computer, and professional duties.
It’s important to keep in mind that the FLSA is the legal framework enforced on the federal level by the US Department of Labor. However, some states have more stringent overtime laws than the federal government.
For example, certain states may require overtime pay on a daily rather than weekly basis. This means you owe time and a half pay for every extra hour that an employee has worked above the standard 8 hours per day. Such is the case in the states of California, Alaska, and Nevada, among others.
You need to confirm that you meet your state’s requirements on time and a half pay, even if you are sure that you have fulfilled the FLSA rules.
How To Calculate Time And A Half Payments Under The FLSA
You owe overtime to all non-exempt employees in your company who have worked more than 40 hours for any given workweek. According to the FLSA, it should be at least one and a half times their regular hourly wage.
How you calculate overtime wages, however, differs between the hourly and salaried workers on your team.
What is time and a half pay for the various types of employees, then?
Overtime Pay For Hourly Workers
Calculating time and a half pay for hourly employees is the easiest case.
The steps that you should go through are the following:
- Determine the overtime pay rate by multiplying the regular pay rate by 1.5.
- Calculate total overtime pay by multiplying the overtime pay rate by the number of overtime hours for a particular week.
- To find out the full week’s pay of an employee, add the regular weekly payment to the overtime pay.
Let’s consider the case of Robert. He is an hourly non-exempt employee in your California-based business, which has more than 26 staff members. You pay him minimum wage in California, which is $13.
Last week, Robert completed 46 hours. He worked one extra hour from Monday to Thursday and two extra hours on Friday. This means he has worked 6 hours over the standard 40 hours per week.
His overtime pay rate is:
$13 x 1.5 = $19.5
The overtime payment for the week is:
6 hours x $19.5 = $117
Robert’s standard payment for a week is:
40 hours x $13 = $520
To find out his total gross pay for the 46-hour workweek, add his standard weekly payment to the overtime payment:
$520 + $117 = $637
Overtime Pay For Salaried Workers
How you calculate time and a half pay for salaried employees depends on the type of salary that they receive.
Salaried Employees With A Fixed Number Of Work Hours
To calculate the total payment for a salaried worker with fixed work hours per week, you need to do the following:
- Determine the regular hourly pay rate by dividing the weekly salary by the fixed number of hours
- Calculate the payment for a 40-hour workweek
- Find out the overtime pay rate by multiplying the regular pay rate by time and a half
- Calculate the overtime pay by multiplying the overtime pay rate by the number of overtime hours for a particular week
- Add the overtime pay to the 40-hour workweek payment
Let’s take Martha as an example. Her weekly salary is $540 for 36 hours of work. However, last week she worked 42 hours instead. This means she has completed two overtime hours above the 40-hour workweek.
Her regular hourly pay rate is:
$540/36 hours = $15 per hour
This means that for a 40-hour workweek, her pay is:
40 hours x $15 = $600
Her overtime pay rate is:
$15 x 1.5 = $22.5
Her overtime payment for the week should thus be:
2 hours x $22.5 = $45
Martha’s gross pay for the week equals the regular payment for a 40-hour workweek plus the overtime payment:
$600 + $45 = $645
Salaried Employees With A Fluctuating Workweek
Calculating the gross pay for salaried employees who work a different number of hours from week to week requires a different approach. Their standard hourly pay rate will differ, depending on how many hours they have worked in a particular week.
Let’s say that Melinda’s weekly pay is $900. She has worked 45 hours this week, so she has 5 overtime hours.
First, calculate her hourly rate for this particular week:
$900/45 hours = $20 per hour
In Melinda’s example, the 5 overtime hours have been paid at the standard rate with her weekly pay.
To get the overtime pay rate, you thus need to multiply the hourly rate by .5 rather than 1.5:
.5 x $20 = $10 per hour
Her overtime payment for the week is then:
5 hours x $10 = $50
You can find out Melinda’s total gross pay by adding together her weekly salary and the overtime payment:
$900+$50 = $950
Stay On Top Of Your Payroll Management
Knowing how to handle overtime payment is an indispensable part of managing your company’s payroll. It ensures you compensate your employees fairly and remain FLSA-compliant.
It can be challenging for business owners to determine when and how to pay time and a half to their staff. Hourly can be your trusted partner in tracking your team’s work hours, handling workers’ comp, and keeping compliant payroll records.
Ready to give it a go? Get started by downloading the Hourly app.
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