Generally, employees will work their set hours, and you will pay them their regular rate of pay. Sometimes, employees might have to work more time. If this happens, you may have to pay your employees a higher rate of pay called time and a half.
What is time-and-a-half pay?
When an employee works overtime hours, you must pay them time and a half. This is also called the overtime premium or the overtime rate of pay.
Time-and-a-half pay is 50% more than an employee’s regular rate of pay. For every hour of overtime an employee works, you must give them their regular rate of pay plus half of that. To calculate an employee’s overtime rate of pay, multiply their regular rate by 1.5.
The Fair Labor Standards Act (FLSA) regulates overtime and overtime wages. According to the act, you must pay time and a half to employees who work more than 40 hours in a workweek.
Your employees might be exempt from the overtime premium. For exempt employees, you do not have to pay time and a half for overtime hours.
You don’t get to choose which employees are exempt from overtime wages. The FLSA determines that for you.
There are many requirements employees must meet to be considered exempt.
- You must pay the employee a salary.
- You must pay the employee at least $23,660 per year ($455 per week).
- The employee must have executive, administrative, or professional duties. The FLSA has details on what duties exempt an employee.
It’s a common misconception that simply paying a salary exempts an employee from overtime wages. This is not true. You can still have salaried non-exempt employees. The employee must also perform qualifying duties to be exempt.
There are additional things that might exempt an employee. For example, there are computer employee and outside sales exemptions. For a full list of things that makes an employee exempt from overtime wages, check out the FLSA list of exemptions.
Employees who do not qualify for exemption are called nonexempt. If a nonexempt employee works overtime, they must be paid time and a half.
How to calculate time and a half
When a nonexempt employee works overtime hours, you must pay them their normal earnings, plus overtime earnings.
Let’s pretend that you have a nonexempt employee who earns $10 per hour. Last workweek, the employee worked 50 hours. This means the employee worked 40 regular hours and 10 overtime hours.
First, calculate the employee’s regular earnings.
The employee earned $400 in normal wages.
Now calculate the overtime wages. Remember, the overtime rate of pay is one and a half times the regular rate of pay.
Calculate time and a half to start.
Then multiply the overtime rate by the number of overtime hours.
The employee earned $150 in overtime wages.
To get the employee’s total gross wages, add together the regular wages and the overtime wages.
In this example, your employee earned $550 in gross wages for the workweek.
Don’t hassle with calculating each employee’s overtime wages. When you use Patriot Software’s easy-to-use payroll software, we’ll do the calculations for you. We guarantee accuracy. You can try the software for free.
This article was updated from its original publication date of 11/23/2014.