What Is Straight-Time Pay? A Guide for Employers

What is straight-time pay?

Straight-time pay is the amount of money an employee earns during a pay period, not including overtime pay, bonuses and other forms of compensation. It’s based on the regular number of hours worked. For example, if your employees are scheduled for 36 hours per week, their straight-time pay is based on 36 hours of work.

What is the difference between straight time and overtime?

Straight time is only used to calculate the regular number of hours worked. If your company is subject to the FLSA, that means nonexempt employees work a maximum of 40 regular hours before becoming eligible for overtime. Overtime pay is extra compensation for hours worked over the 40-hour limit.

Is straight-time pay the same as gross pay?

Not always. Gross pay is the total amount of money earned before you take out taxes and other deductions. In some cases, it works out that straight-time pay and gross pay are the same. For example, if an employee works 80 hours of straight time in a pay period and receives no other compensation, their gross pay will be 80 hours times their hourly rate.

That changes when an employee works overtime or receives compensation that increases their gross pay without increasing their straight-time pay. If someone works 80 hours of straight time and four hours of overtime, their gross pay will include all 84 hours worked, but their straight-time pay would only include the 80 regular hours.

How to calculate an employee’s straight-time pay

It’s easy to calculate an employee’s straight-time pay. Simply multiply the regular number of hours worked by the hourly wage. Here’s an example for a company that pays its employees weekly.

Assume you have an employee who works 40 hours per week and makes $22 per hour. One week, they work 44 hours, making them eligible for overtime pay. To calculate the employee’s straight-time pay, multiply 40 by 22 ($880). As you can see, this calculation ignores the four hours of overtime.

Methods of time tracking

To make accurate straight-time calculations, you must know exactly how many hours your employees work during each pay period. You have a few options for time tracking, all of which have pros and cons.

Time sheets

A time sheet is a document that tracks an employee’s work hours, making it easier to calculate their earnings. Some companies use digital time sheets or Excel spreadsheets, while others use paper forms that must be filled out by hand. Employees typically fill out their own time sheets, recording their hours at the end of a shift or the end of a pay period.

One of the biggest advantages of using time sheets is that they’re inexpensive. If you use spreadsheets, you don’t have to spend money on anything other than the spreadsheet software and training employees on how to use them. Even when you account for the cost of copying expenses, paper time sheets are also rather inexpensive.

Another advantage is that time sheets may make it easier for your accounting team to assign costs to specific projects. For example, if you have three employees working to implement a new IT system for one of your biggest clients, you can allocate the cost of their labor accordingly.

A major disadvantage of using time sheets is that they’re prone to human error. If an employee waits until the end of the pay period to fill out a time sheet, they may make a mistake when recording their hours.

Time cards

Time cards, also known as punch cards, are cardboard tickets used to record an employee’s work hours. When employees arrive at work, they insert their cards into a time clock, which “punches” the start time on each card. At the end of the day, employees punch out by inserting their cards into a clock a second time. This records the end of each employee’s shift.

One of the biggest advantages of using time cards is that they’re a little more accurate than time sheets. Employees have to punch in and out every day, ensuring that you know exactly when they are working. With time sheets, you have to rely on employees to be honest and accurate with their work hours.

A potential drawback of using time cards is that they’re not completely fraud-proof. An employee who’s running late may ask a coworker to punch their card before they arrive, allowing them to record more hours than they worked. Employees may also forget to clock in or out, creating more administrative work for your payroll department.

Timekeeping software

With timekeeping software, employees “punch” in and out by recording their arrival times and departure times. Some companies use digital time clocks, which allow employees to record their working hours by entering an employee ID or other unique identifier. Others have employees record their arrival and departure times via a software interface.

A big advantage of using timekeeping software is that it usually integrates with other applications, such as payroll software or enterprise resource planning systems. This makes it easier to transfer data, reducing the administrative burden on your payroll department. The biggest drawback of timekeeping software is that it’s more expensive than time sheets or time cards.

What Is Straight-Time Pay? A Guide for Employers