How to Calculate Time and a Half

Unless an employee is exempt, companies are obligated to pay overtime when their employees work more than 40 hours during a working week.

This has to be paid at a rate of time and a half. What exactly is time and a half, how does it work and how is it calculated?

What Is Time and a Half?

Simply put, time and a half is an extra 50% on top of an employee's standard hourly wage.

For every hour an employee works in addition to the standard 40-hour working week, they will be paid their regular rate plus an additional 50%.

This is sometimes known as 'overtime', an 'overtime premium' or the 'overtime rate of pay'. This is outlined in guidance published by the FLSA.

What Is the FLSA?

The Fair Labor Standards Act (FLSA) is a body that regulates and monitors overtime payment. It makes the guidelines that decide whether individuals should be considered exempt or non-exempt, as well as protecting other areas of employment law.

Who Gets Time and a Half Pay and When?

Not every employee will be able to claim overtime pay. Their eligibility will be outlined in their employment contract.

If an employee is exempt from overtime pay, they will generally not be compensated for any additional hours worked.

Exemption from overtime pay is outlined in the FLSA guidelines, although some states will have stricter rules than others. If you are unsure whether you are exempt or non-exempt, check the guidelines and the overtime rules for your state.

Exempt Employees

Although the exact criteria for whether an employee is exempt or not can vary, the FLSA guidelines do set out some general criteria for employees who are exempt:

• Salaried employees in general
• Employees with a salary of over $35,568 per year or $684 per week
• Employees with roles or duties considered to be exempt, such as executive or administrative positions

Non-Exempt Employees

Most employees who are not salaried will find that they are entitled to overtime pay. The general criteria for non-exempt employees are set out by the FLSA, although state requirements can vary:

• Employees who do not earn over $35,568 per year or $684 per week
• Employees who are paid hourly
• Employees with roles or duties that place them in a position of authority, such as executive positions.

When to Pay Time and a Half

The FLSA guidelines state that overtime should be paid when an employee works more than 40 hours in their working week. For some states, this is slightly different, with as little as eight hours' work being required before an employee is eligible for overtime.

There are a few situations when an employee would not be eligible for overtime pay, such as working a holiday weekend, for example Labor Day, or a religious holiday, such as Christmas. However, companies should make efforts to not discriminate against staff who are working on these days.

Paying overtime rates in these circumstances can help to improve staff morale and encourage better relationships between staff and employers.

How to Calculate for Hourly and Salaried Employees

Hourly

Calculating the correct rate of overtime pay for an employee on an hourly contract is relatively simple.

Multiply their contracted hourly rate by 1.5 and the result is the time and a half pay that would be given for their overtime hours.

Example of Overtime Pay for Employees on Hourly Contracts

If an employee earns an hourly rate of $15 per hour, their overtime hourly rate would be worked out as:

$15 x 1.5 = $22.50

If they worked 44 hours in a week, 40 hours would be paid at $15 and 4 hours would be paid at the overtime rate of $22.50.

Therefore, their weekly pay would be:

40 x $15 = 600
4 x $22.50 = 90
Total = 600 + 90 = $690

Salaried

Although many salaried employees are exempt from overtime eligibility, there will be some who qualify. Working out how to pay someone time and a half when they are salaried is a little more complicated than for those on an hourly rate.

To correctly calculate time and a half for someone who is salaried, first work out what their hourly rate would be.

To do this, divide their base annual salary by 52 to calculate their weekly pay. Then, divide this figure by the number of hours each week that they are contracted to work.

Once you know their hourly rate, simply multiply this figure by 1.5 for their time and a half rate.

Example One of Overtime Pay for Salaried Employees

If an employee has an annual salary of $22,000 and they work 40 hours per week on average, then overtime would be calculated as follows:

22,000 divided by 52 to give the weekly amount = $423.08 per week
423.08 divided by 40 to give their hourly rate = $10.58 per hour

This hourly rate can then be multiplied by 1.5 to give their overtime rate per hour.

10.58 x 1.5 = $15.87

Therefore, if this employee worked 47 hours instead of their usual 40, their pay would be calculated as follows:

40 hours at their usual rate: $423.08
7 hours at their overtime rate: 15.87 x 7 = $111.09
Total for that week: 423.08 + 111.09 = $534.17

Example Two of Overtime Pay for Salaried Employees

Calculating salaried overtime can be a little more complicated if the employee is contracted for less than 40 hours. In this situation, they would get their usual hourly rate for up to 40 hours and then overtime for any extra.

If an employee has an annual salary of $22,000, but is only contracted to work 35 hours per week, it would be calculated as follows:

22,000 divided by 52 to give the weekly amount = $423.08 per week
423.08 divided by 35 to give the hourly rate = $12.09 per hour
12.09 x 1.5 for the overtime rate = $18.14 per hour of overtime

If this employee has a week when they work 47 hours instead of their usual 35, the overtime would be calculated as follows:

40 hours at their standard hourly rate: 40 x 12.09 = $483.60
7 hours at their overtime rate: 7 x 18.14 = $126.98
Total for that week: 483.60 + 126.98 = $610.58

Final Thoughts

Knowing how and when to pay overtime is a vital part of running a business and managing payroll successfully.

By ensuring that you are fairly compensating your employees for their time, you will be helping to maintain a positive working atmosphere as well as being compliant with FLSA guidelines.

It can be a challenge to know exactly who is entitled to overtime pay and when it should be given, but by following the guidelines and using reliable payroll software, employers and employees can work knowing that their hours are being counted properly.