Straight-time pay definition and meaning
“Straight-time” refers to hours worked by an employee at their regular pay rate, and “straight-time pay” is the total amount of pay that is due to an employee for performing work during non-overtime hours.
While straight-time is commonly considered to be the first 40 hours worked within a pay period, it could be fewer, depending on state or local overtime laws, or company overtime policies. States like California require that employees receive overtime pay for hours worked in excess of 8 hours in a given day. Straight-time pay also does not include holiday pay, or paid time off.
More about straight-time pay
To calculate straight-time pay, an employer should start by identifying all hours in the period that aren’t “straight-time”, like overtime, paid holidays, or PTO, to exclude them from the calculation. The remaining hours add up to be the employee’s straight-time. Next, multiply the total straight time hours by the employee’s regular pay rate to calculate their “straight-time pay”.
For example, let’s say Fred makes $20 per hour, and usually works 40 hours a week. At the end of the week, Fred’s straight-time pay would be $800. But if Fred takes a personal day during the next week, using 8 hours of paid time-off (PTO), he would only have 32 hours of straight-time pay ($640), plus 8 hours of PTO, ($160). Fred still gets paid the same amount for the week, but only the hours worked at Fred’s regular pay rate are used to calculate straight-time pay. If Fred were to stay an extra hour on any day of that period, making a total of 33 hours worked plus 8 hours PTO, even though the total number of hours would exceed 40 (33 + 8 = 41), because the straight-time is still below 40, no overtime pay is owed.
Does straight-time pay affect overtime?
The Fair Labor Standards Act (FLSA) states that all employees must have a defined regular rate of pay, which is used to determine what an employee’s overtime pay rate will be. So, because straight-time refers to the total amount of hours worked at the employee’s regular rate of pay, it’s often used to calculate overtime.
Let’s look at another example with our friend Fred, and what happens when he works 50 hours in a week. This means Fred works 40 hours at his regular rate of pay, plus 10 hours of overtime. In order to calculate how much overtime pay Fred should receive, we would take his straight-time pay of $20 and multiply it by 1.5 times his regular rate of pay. Here’s a closer look at the calculations:
- $20 x 1.5 = $30.00 (overtime rate of pay)
- $30.00 x 10 hours worked overtime = $300.00
- Straight-time pay = $800.00
- Overtime pay = $300.00
- $800.00 + $300.00 = $1,100.00
How is straight-time pay calculated when there are multiple pay rates?
Scenarios where an employee is paid multiple rates can also make calculating straight-time pay important. For example, what if Fred works in an industry where pay rate is determined by role? If, in addition to working his regular schedule (40 hours at $20 per hour), he were to agree to come in on Wednesday (his day off) to work 10 hours in another capacity, which is paid at a rate of $8 per hour, Fred’s employer would need to calculate straight-time compensation differently.
When there are multiple regular rates of pay in the pay period, a weighted average must be calculated first in order to determine straight-time pay. Following our example, Fred has worked at his regular rate for 8 hours each day on Monday, Tuesday, Thursday, Friday, and Saturday, and at the lower rate of $8 per hour for 10 hours on Wednesday, Fred’s straight-time pay would be calculated as follows:
(16 hours x $20/hour) + (10 hours x $8/hour) + (14 hours x $20/hour) = $320 + $80 + $280 = $680 of straight-time pay for the first 40 hours worked.
But because Fred worked 50 hours in the week, overtime would be calculated based on the remaining 10 hours, typically at Fred’s regular rate of $20/hour, though some states have laws around these calculations, too, that ensure employees are being paid overtime based on the highest rate of pay, regardless of what role is being worked during overtime hours.
Keep in mind that employers must be aware of overtime laws in every region where their business operates. While the national overtime standard is 40 hours, this is subject to local law. Additionally, some states and jurisdictions require employers to calculate overtime based on the employee’s regular rate plus other compensations such as piece-rate or commission-based pay.
Furthermore, it is a violation of the FLSA for employers to compensate employees with straight-time pay when they’ve worked overtime hours during the period. The Department of Labor’s Wage and Hour Division will occasionally investigate organizations that are in violation of regulations and recover overtime wages.
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