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Updated: April 6, 2023
Over 55% of workers in the United States are paid per hour, according to data from the US Department of Labor. And, if you have many hourly employees on your payroll (especially those who work overtime), it’s important to understand what time and a half pay is, the federal law that requires it, and how it’s calculated. Also, understanding which of your workers qualifies for time and a half (and when it should be paid), can go a long way toward keeping any confusion to a minimum when cutting paychecks for your employees.
To help businesses stay on top of overtime, in this article we’ll explain what “time and a half” is, when employers are legally required to pay it, some examples of how to calculate it, plus some common mix-ups that are easy to avoid.
To start, time and a half pay, also known as overtime pay, is always based (and calculated) using an eligible employee’s hourly pay rate. What does this mean? When you pay your employees time and a half, they are being paid 50% more than their regular pay rate. Only non-exempt employees are eligible for time and a half pay according to the Fair Labor Standards Act (FLSA), which is the federal law that sets all requirements for overtime pay and eligibility.
Generally speaking, most employees eligible for overtime are paid hourly, but there are some cases when a salaried employee may qualify for overtime pay (which we’ll talk a bit more about later in this article).
Next, we’ll talk about when overtime pay is usually due and what the regular hours of a typical work shift entail.
First things first: The FLSA guidelines consider 40 hours to be a regular work week. Why is this important to understand? Any non-exempt employees who work over the standard 40 hours will be eligible for a bump in pay (time and a half). As an employer, this means if any non-exempt employee on your staff works over and above 40 hours in a single week, you are required to pay time and a half.
Now that we know when time and a half is due, let’s talk a bit about how the math works out.
To calculate time and a half pay, you’ll use both:
For example, if you have an employee earning $15 per hour, you would multiply their regular pay rate by 1.5%, and the total would be the employee’s time and a half pay rate, which in this example comes out to $22.50. Let’s see how the calculation breaks out and adds up as a no-frills math equation:
With a better understanding of the math behind calculating time and a half pay under our belts, let’s go over who qualifies and who does not.
After you’ve learned more about time and a half (and who qualifies for overtime), read our guide on shift differential pay to learn what it is and how some companies use it to encourage employees to work less desirable shifts.
In the simplest terms, an employee must be classified as non-exempt in order to be eligible for time and a half pay. It’s important that employees are categorized correctly, following FLSA guidelines, because when employees are misclassified and don’t receive overtime, employers could face fines that start at $1,000 per violation. To begin, it’s helpful to understand the difference between exempt and nonexempt employees.
As the name implies, in its Handy Reference Guide, the FLSA provides a lot of helpful information on how an employee should be categorized and the categories of employees that can be considered exempt. They also have a PDF download of the guide if you want to save a copy for your records.
Exempt employees are those who:
FLSA rules state that an employee needs to fall into one of the following six exemption categories to be considered an exempt employee:
On the other hand, a non-exempt employee is:
Understanding the basics behind overtime pay can be helpful because sometimes employers need their staff to work extra hours on top of a standard shift. The good news is that calculating overtime pay is simple when you follow a few basic steps.
Even though this formula isn’t particularly complicated, let’s put it to the test with a fictional employee.
Let’s say you operate a niche business that manufactures laptop bags for sports fans, and Judith is a non-exempt employee on your staff, earning $20 an hour. Between your busy season approaching (and a well-timed interview on a national fan podcast), demand for your product is up, and you ask Judith if she can take on a few additional hours. She is happy to help.
If Judith worked 50 hours in one week, she would be paid her regular hourly rate of $20 for the first 40 hours but would be paid time and a half for the 10 overtime hours. To determine Jane’s overtime rate, you’ll use the following calculation:
Now that we have Judith’s overtime rate figured out, the next step is multiplying it by the number of overtime hours worked.
So, in our first example Judith would earn an additional $300 in overtime pay for that week, which should be added to her regular pay.
Now that we’ve covered one of the most commonplace situations where overtime applies, let’s talk about one that doesn’t happen as often.
After learning everything there is to know about time and half, it’s a good idea to know which documents you need to hold onto. In our guide, we cover payroll record keeping rules employers should be aware of.
Though it’s less common, there are instances when an employee receives a salary — rather than an hourly wage — and is still eligible for overtime. This occurs when your employee cannot meet both the qualifications for an exempt employee under FLSA rules, which is that:
It’s also important to note that if you do have salaried non-exempt employees, you should be tracking their hours in the same fashion as hourly employees.
Though calculating overtime pay for salaried employees is similar to the above mentioned process, it requires a few more steps to get the numbers right.
Now, let’s apply the steps to a hypothetical scenario involving a salaried employee (earning overtime) at a company.
As we mentioned, it takes a little bit more math to calculate overtime pay for your salaried, non-exempt employees. To add up the numbers, we’ll figure out the pay for Jim, a salaried employee who worked 47 hours (putting in seven extra hours) the previous week and who earns $32,000 a year. To determine his overtime rate, we’ll first need to divide his annual salary by 52 to determine his weekly pay rate.
Now that we have Jim’s weekly salary, the next step is to divide it by 40 hours to determine his current hourly rate.
Finally, we have all the information we need to calculate Jim’s overtime rate. Remember, this is done by multiplying the hourly rate of pay x 1.5% (which is time and a half).
Drum roll please! Now that all the necessary calculations are complete, we can calculate Jim’s overtime pay.
Jim will get paid his regular salary of $615.38 plus an additional $161.49 for overtime for the week.
If you have hourly workers that are putting in extra hours during the holiday season, you may be wondering how the numbers work out.
Companies are not required to pay time and a half to employees who work holidays because paying overtime for holiday hours is not subject to the FLSA’s regulations (although many extend it to their employees as a “thank you” for their work during the festive times of the year). It can get a little tricky if, during the regular work week, an employee is eligible for both overtime and holiday pay. In this case, overtime should be calculated based on their regular hourly wage only — with holiday pay left out of the equation.
There are a few things to remember for companies that use bonuses to encourage team members to go the extra mile.
Whether an employee is hourly or salaried, as long as they are classified as a non-exempt employee, the rules for including bonus pay in overtime are the same. Let’s take a look at how this would work.
Similar to the examples we looked at earlier in this article, to account for a bonus in overtime pay, you would add the bonus amount to the employee’s total wages for the week to get their regular rate of pay. You would then multiply the regular rate of pay by 1.5% to arrive at their overtime pay.
Though the basics of time and a half are straightforward, there are some spots where an employer can slip. Here are some items to keep in mind.
We chose OnPay based on their dynamic reporting and affordable payroll service, but after a year and a half we appreciate their thorough customer service and improvements which really help us streamline our payroll process.
— Mark Donati, Donati Family Vineyard, Inc
Over 70 million people work hourly, and it’s likely that some of them work extra shifts (and earn overtime pay) from time to time. That’s why understanding the ins and outs of time and a half, as well as how to calculate it, is important. Whether you’re an employer who relies on employees that can work more than 40 hours per week on a regular basis, or only occasionally need employees to put in a few extra hours, understanding the laws surrounding overtime pay and your obligations can help you stay compliant (and keep your staff happy and productive).
Double pay is pay that is twice an employee’s regular hourly wage, where time and a half is 1.5% of a worker’s rate of pay. Double time is not subject to FLSA rules, and currently only two states (California and Washington) have set rules for double time pay.
Holiday pay is the pay received for a recognized holiday. Holiday pay cannot be factored into the overtime calculation, unless the employee works the holiday. And while employers are required to pay their employees for hours worked on a holiday, holiday pay is not regulated by federal wage laws, so employers are not required to pay their employees time and a half to work a holiday, though many choose to do so.
To get paid time and a half, an individual has to be classified as a non-exempt employee. Because independent contractors are not employees, they are not eligible to receive time and a half.