How to Calculate Time and a Half Pay

Calculating “time and a half” pay is an important aspect of compensation, ensuring employees receive fair wages for extended work hours. This concept refers to the overtime rate, which is typically 1.5 times an employee’s regular hourly rate. Understanding how this calculation works is beneficial for both workers and employers to ensure compliance with labor laws and accurate compensation practices.

Determining Overtime Eligibility

Overtime pay requirements are primarily governed by the Fair Labor Standards Act (FLSA) at the federal level. This Act mandates that most employees in the United States receive overtime pay at a rate of not less than one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.

Employees generally fall into one of two categories: non-exempt or exempt. Non-exempt employees are those covered by FLSA overtime rules and are eligible for overtime pay, which typically includes hourly workers. Conversely, exempt employees are not eligible for overtime pay because they meet specific criteria related to their salary level and job duties, often holding executive, administrative, or professional roles.

State laws may have additional overtime requirements, but federal standards provide the baseline.

Calculating the Regular Hourly Rate

The “regular rate of pay” is the foundation for calculating overtime and is not always simply an employee’s base hourly wage. It encompasses all remuneration for employment paid to, or on behalf of, the employee in a workweek, with certain statutory exclusions. To determine the regular rate, the total compensation for employment in a workweek (excluding statutory exclusions) is divided by the total number of hours actually worked in that week.

Various forms of compensation must be included in the regular rate calculation. This includes non-discretionary bonuses, such as production or attendance bonuses, which are promised in advance and expected by the employee. Commissions earned based on a set arrangement also contribute to the regular rate. Shift differentials, which are extra payments for working undesirable hours, must be included as well. The fair market value of non-cash compensation is also factored in.

Certain payments are excluded from the regular rate calculation. These include gifts, payments for vacation, holiday, or sick leave, and truly discretionary bonuses where both the decision to pay and the amount are at the employer’s sole discretion without prior agreement or promise. Reimbursements for business expenses incurred by the employee for the employer’s benefit, such as travel expenses or supplies, are also excluded.

Computing Time and a Half Pay

Once the regular rate of pay is determined, calculating time and a half pay is straightforward. The formula for time and a half is the regular hourly rate multiplied by 1.5. This overtime rate is then applied to all hours worked beyond 40 in a workweek.

For example, if a non-exempt employee’s regular rate of pay is $20 per hour, their time and a half rate would be $30 per hour ($20 x 1.5). If this employee worked 45 hours in a week, they would receive regular pay for the first 40 hours and overtime pay for the additional 5 hours. Their total weekly earnings would be 40 hours x $20/hour = $800, plus 5 overtime hours x $30/hour = $150, totaling $950.

For a salaried non-exempt employee, the process involves first converting their weekly salary into an hourly regular rate. This is done by dividing the weekly salary by the number of hours the salary is intended to cover, often 40 hours. If a salaried non-exempt employee earns $1,000 per week and works 40 hours, their regular hourly rate is $25 ($1,000 / 40). If they work 45 hours in a week, their overtime rate is $37.50 ($25 x 1.5), and their overtime pay for the 5 additional hours would be $187.50 ($37.50 x 5). Their total weekly earnings would be the $1,000 salary plus the $187.50 in overtime, for a total of $1,187.50.