How to Calculate Time and a Half for Overtime Pay

“Time and a half” refers to an increased hourly rate, 1.5 times an employee’s regular pay, for hours worked beyond a standard threshold. This compensation method applies to extended work periods, typically exceeding 40 hours in a defined workweek. Understanding this calculation is important for employers and employees to ensure compliance with federal labor standards.

Determining the Regular Rate of Pay

The “regular rate of pay” is the foundation for calculating time and a half and is more comprehensive than an employee’s basic hourly wage. Under the Fair Labor Standards Act (FLSA), the regular rate generally includes all forms of compensation paid to an employee, with certain statutory exceptions.

Compensation included in the regular rate calculation includes hourly wages, non-discretionary bonuses, commissions, and shift differentials. Non-discretionary bonuses are promised in advance or based on a predetermined formula, such as production, attendance, or quality bonuses. If a bonus is earned over multiple workweeks, the total amount should be distributed among all weeks worked to properly calculate the regular rate for each week.

Certain payments are excluded from the regular rate calculation. These include discretionary bonuses, given at the employer’s sole discretion without a prior promise, and gifts not tied to hours, production, or efficiency. Other exclusions are payments for time not worked, such as vacation, holiday, or sick pay, and expense reimbursements. The regular rate is computed by dividing total compensation in the workweek (excluding statutory exclusions) by total hours worked in that workweek.

For employees with varying hourly rates within a single workweek, the regular rate is determined by dividing the total earnings for all hours worked by the total number of hours. Similarly, for salaried non-exempt employees, the weekly salary equivalent is divided by the total hours worked in that week to arrive at their regular rate. If a salaried non-exempt employee also receives a non-discretionary bonus or commission, that extra compensation must be added to the weekly salary before dividing by the hours worked for the regular rate calculation.

Identifying Overtime Hours

Overtime hours are generally defined as all hours worked in excess of 40 in a single workweek. The FLSA sets this federal standard, emphasizing that overtime is calculated based on the workweek, not daily.

A “workweek” is a fixed and regularly recurring period of 168 hours, which consists of seven consecutive 24-hour periods. This workweek can begin on any day and at any hour established by the employer, and it does not need to align with the calendar week or the pay period. Once established, the workweek typically remains fixed, though different workweeks can be set for different groups of employees.

Various activities and time periods count as “hours worked” for overtime purposes. This includes all time an employee is on duty, on the employer’s premises, or at any other prescribed place of work. Time spent on employer-required training, travel between job sites during the workday, and certain on-call time are generally considered hours worked. For instance, if an employee is required to remain on the employer’s premises or so close that they cannot use the time effectively for their own purposes, that on-call time is compensable.

Calculating Overtime Earnings

Once the regular rate of pay and total overtime hours are determined, calculating overtime earnings is straightforward. The formula for overtime pay is: (Regular Rate of Pay) x 1.5 x (Number of Overtime Hours).

For example, if an employee’s regular rate is $20 per hour and they worked 45 hours in a workweek, they have 5 overtime hours. The overtime premium is $20 (regular rate) x 0.5 (the “half” in time and a half) x 5 hours, which equals $50. Their total gross pay for the week would be their straight time pay ($20 x 40 hours = $800) plus their overtime pay ($20 x 1.5 x 5 hours = $150), totaling $950.

Consider an employee earning a weekly salary of $800, intended to cover 40 hours, who worked 48 hours in a week. Their regular rate of pay is $800 / 40 hours = $20 per hour. With 8 overtime hours, their overtime premium is $20 x 0.5 x 8 hours = $80. Their total gross pay for the week would be $800 (salary) + $80 (overtime premium), equaling $880.

If an employee works at different hourly rates within a week, such as 30 hours at $15 per hour and 15 hours at $18 per hour, their total earnings for 45 hours are ($15 x 30) + ($18 x 15) = $450 + $270 = $720. Their regular rate of pay is $720 / 45 hours = $16 per hour. With 5 overtime hours, the overtime premium is $16 x 0.5 x 5 hours = $40. Their total pay would be $720 (straight time for all hours) + $40 (overtime premium) = $760.