What is time and a half?

Time and a half means that employers will offer 50% more than the eligible employee’s standard rate of pay. As such, for every additional hour an employee works on top of 40 hours, they must be paid at their regular rate plus an additional half. Calculating time and a half is simple; just multiply the person’s regular rate of pay by 1.5.

The majority of workers who are paid an hourly wage and work more than 40 hours per week are entitled to a higher pay rate for any additional hours during the workweek. Overtime isn’t compulsory for work carried out on weekends, holidays, or regular rest days. There’s currently no upper limit on the number of hours an employee over age 16 can work each week.

For instance, if an employee is usually paid $12 per hour, they’ll make $18 per hour with time and a half.

Daily overtime and recent changes

In some states, there are laws pertaining to daily overtime. For example, in Oregon, manufacturing employees who work in excess of 10 hours per day are entitled to overtime. In Colorado, overtime is given to employees who work more than 12 hours per day. Nevada, California, and Nebraska have daily overtime laws for working over eight hours daily.

In 2019, the U.S. Department of Labor announced a change to its policy that rendered 1.3 million additional American workers eligible for overtime pay. In addition, in 2020, salaried employees whose workweek varies became eligible for additional bonuses and pay-based incentives.

Not all employees are eligible for time and a half, and eligibility depends on whether the individual is exempt or non-exempt.

Overtime and payroll

Just like holiday pay, overtime is taxed the same as regular wages. The employer contributes payroll taxes such as Federal Unemployment Tax, half of Medicare and social security on the full amount of each worker’s paycheck. Small business owners will include their employees’ time and a half earnings on their small business taxes as part of their standard payroll deduction.

When you run payroll, the software you use should give a prompt to enter the number of hours each non-exempt employee worked. From here, it’s easy to discern which hours worked are subject to time and a half and standard rate.

Who’s eligible for time and a half?

While many workers are eligible for time and a half, not all are. Examples of employees who aren’t include:

• Executive employees
• Administrative employees
• Professional employees
• Some sales workers
• Some transport workers
• Some domestic workers
• Some seasonal workers
• Some communications and media workers
• Most salaried workers
• Anyone earning more than the FLSA exempt minimum of $35,568 per year or $684 per week

While these are the rules, there are important exemptions all employers should be aware of. For example, if the Department of Labor considers a role to be highly compensated (earning more than $107,432 per year), but the individual works in a non-exempt role, the employee won’t be eligible for overtime pay.

Non-exempt employees are entitled to time and a half overtime pay. They’re usually paid on an hourly basis and don’t work in executive or administrative roles. Construction, hospitality and retail workers are good examples of non-exempt employees. Consult the DOL fact sheets on overtime pay to get a full overview of overtime eligibility.

Exempt employees

Employees are exempt from FLSA overtime if they meet the following criteria;

• Make more than $35,568 annually
• Take home a salary and
• Carry out exempt job duties

Job duties considered exempt are high-level responsibilities that have a direct impact on a business’s daily operations. This includes computer-based, professional, administrative and executive duties.

Keep an eye on the DOL website for changes, as some previously exempt employees might become non-exempt and vice versa. Be sure to keep close tabs on workers earning around $684 per week to stay compliant and make a smart decision about whether to pay overtime or increase their salary.

It’s also possible to boost pay with a bonus paid at least quarterly that makes up less than 10% of an overall salary. This might be more cost-effective for your business than paying FLSA overtime, depending on your budget and business requirements.

Non-exempt employees

Non-exempt employees are entitled to FLSA overtime and must meet the following criteria:

• Earn less than $35,568 per year
• Not on a salary and/or
• Don’t carry out exempt duties

All non-exempt employees should receive time and a half or 50% extra on top of their usual wage for any hours worked in excess of 40 in a workweek. Remember that some salaried employees are entitled to overtime and that each state has its own local laws governing overtime.

How to calculate time and a half

While the majority of workers who are entitled to FLSA time and a half are paid on an hourly basis, some aren’t. Below is a guide to calculating time and a half for hourly and salaried employees.

Hourly wage

If you have a non-exempt employee who earns $15 per hour and worked 50 hours in the past workweek, you’ll calculate their pay as follows:

• Work out the employee’s regular earnings: 40 hours x $15 = $600 in regular wages
• Calculate time and a half: 1.5 x $15 = $22.50 per hour overtime rate
• Multiply the overtime rate on additional hours worked by the time and a half rate: 10 hours x $22.50 = $225 of overtime pay
• Add the two totals together: $600 for 40 regular hours + $225 for 10 overtime hours = $825 gross payment

There are two ways to calculate overtime pay when it comes to a salary, depending on whether they work fixed hours or a fluctuating workweek.

Salary: Fixed hours

For people working fixed hours:

• Determine what the regular hourly rate would be
• Calculate what their regular earnings would be
• Apply time and a half
• Times the overtime rate by the number of additional hours worked
• Add the totals together

While many salaried employees are exempt from overtime pay, not all of them are. What’s more, in some instances, it might be more cost-effective to offer an increase in pay instead of committing to paying time and a half for overtime. Work with your finance department and executive decision-makers to create an overtime strategy that adds the most value to your business.