How to Calculate Time and a Half Pay for Overtime

Time and a half pay is a higher compensation rate for employees working beyond standard hours. It means an employee receives their regular hourly rate plus an additional half of that rate for each overtime hour.

Foundations of Overtime Pay

Overtime pay is primarily governed by federal law. The Fair Labor Standards Act (FLSA) mandates that non-exempt employees receive overtime pay for hours worked over 40 in a workweek. This federal standard applies to most private businesses, hospitals, schools, and public agencies.

While the FLSA sets the federal baseline, individual states may have their own overtime laws. These state laws can mandate overtime pay in additional circumstances, such as for hours worked beyond a certain daily limit or for work on consecutive days. When state and federal laws differ, employers must adhere to the law that provides the greater benefit or protection to the employee.

The distinction between exempt and non-exempt employees determines overtime eligibility. Non-exempt employees are typically hourly workers or salaried employees earning below a certain threshold, and they are covered by FLSA overtime provisions. Exempt employees, usually those in executive, administrative, or professional roles who meet specific salary and duties tests, are not entitled to overtime pay under the FLSA.

Calculating Time and a Half Pay

To calculate time and a half pay, multiply the regular hourly rate by 1.5 to determine the overtime rate. This overtime rate applies to all hours worked beyond the standard 40-hour workweek.

For example, if an hourly employee earns $20 per hour and works 45 hours in a week, their regular pay for the first 40 hours is $20 x 40 = $800. The time and a half rate is $20 x 1.5 = $30 per hour. For 5 overtime hours (45 total hours – 40 regular hours), their overtime pay is $30 x 5 = $150. The employee’s total gross pay for the week is $800 (regular pay) + $150 (overtime pay) = $950.

For a salaried non-exempt employee, first determine their effective hourly rate. Divide their weekly salary by the number of hours the salary covers, often 40 hours. For instance, if a salaried non-exempt employee earns $800 weekly for a 40-hour week, their regular hourly rate is $800 ÷ 40 = $20. If this employee works 42 hours, their regular pay is $800, and their overtime rate is $20 x 1.5 = $30 per hour for the 2 overtime hours. Their total pay for the week is $800 + ($30 x 2) = $860.

Practical Application and Examples

Determining the “regular rate of pay” can become more complex when an employee receives compensation beyond a simple hourly wage. The FLSA requires that the regular rate of pay include all remuneration for employment paid to the employee in a workweek, such as non-discretionary bonuses and commissions. These must be factored into the regular rate before calculating overtime.

When an employee receives a non-discretionary bonus, it is added to their total straight-time earnings for the week. This combined amount is then divided by the total hours worked to arrive at an adjusted regular hourly rate. For example, an employee earning $15 per hour works 45 hours and receives a $100 non-discretionary bonus. Their initial regular earnings are $15 x 45 = $675. Adding the bonus, their total compensation before overtime is $675 + $100 = $775. Their adjusted regular rate is $775 ÷ 45 hours = $17.22 per hour. The overtime premium (half of the regular rate) is $17.22 x 0.5 = $8.61 per hour, and their overtime pay for 5 hours is $8.61 x 5 = $43.05. Their total pay is $775 (regular earnings + bonus) + $43.05 (overtime premium) = $818.05.

For employees who earn commissions, the commission amount earned during a workweek is included in the regular rate calculation. The total weekly earnings, including hourly wages and commissions, are divided by the total hours worked to find the regular rate. If an employee works at different hourly rates within the same workweek, a “blended regular rate” is calculated. This blended rate is the weighted average of all non-overtime wages for the week, determined by dividing the total earnings from all rates by the total hours worked. Overtime is then calculated at 1.5 times this blended rate for all hours exceeding 40.