Time and Attendance
By Jana Reserva
Oct. 11, 2022
Time and a half pay refers to the overtime pay that non-exempt employees are entitled to when they work for more than 40 hours a week, as mandated by the Fair Labor Standards Act (FLSA). It’s called time and a half pay because it’s equivalent to an employee’s hourly rate multiplied by 1.5 per hour of overtime.
Time and a half pay may sound straightforward, but with different exemptions and stipulations under FLSA and state-based laws, it can be challenging to calculate correctly and determine which employees are entitled to it.
This guide will take a deeper look into what is time and a half, how to calculate it, and how to avoid costly sanctions that result from miscalculations.
According to the FLSA, some employees are exempt from time and a half pay, while others are non-exempt. Exemption and non-exemption are driven by factors such as wages and the job duties performed. So what makes an employee exempt from receiving time and a half pay?
As a general rule of thumb, most salaried employees are exempt from time and a half pay if they earn more than $684 in weekly pay or $35,568 annually. This means that hourly employees working standard 40-hour workweeks in the usual frontline industries (retail, hospitality, healthcare, etc.) are non-exempt and must receive time and a half pay if they go into overtime.
To know more about what makes an employee exempt or non-exempt, read this guide.
When calculating overtime pay for non-exempt employees, you need to understand how to do it for hourly and salaried workers. Hourly workers may take up the lion’s share of non-exempt workers entitled to time and a half pay, but it’s also vital to know how to calculate overtime pay for non-exempt salaried employees.
Calculating time and a half for hourly workers is fairly straightforward because you’re already aware of their hourly rate. To compute overtime pay, look at this example and follow these steps.
Say Dave is an hourly worker who earns $13 per hour. For this week, Dave has worked a total of 50 hours. How much do you need to pay him, including overtime?
1. First, you need to get the total regular wages for the week. Multiply the regular pay rate by 40 hours.
$13 x 40 hours = $520 in regular wages
2. To get the hourly time and a half rate, multiply the regular hourly wage by 1.5.
$13 x 1.5 = $19.5 per hour of overtime
3. Multiply the hourly overtime pay by the number of overtime hours rendered.
$19.5 x 10 = $195 of overtime pay
4. Add both regular and overtime wages.
$520 + $195 = $715
In this example, Dave should receive a gross pay amounting to $715, which accounted for regular 40 hours and 10 hours of overtime worked.
Calculating time and a half pay for salaried employees requires an extra step to get the hourly rate because they are paid a fixed wage.
For instance, Lisa earns a fixed weekly salary of $950, and she’s expected to work 36 hours. But for this week, she has worked a total of 48 hours. Here’s how you can compute her overtime pay.
1. Find the regular hourly rate by dividing the fixed weekly salary by the employee’s fixed hours.
$950 / 36 hours = $26.38 per hour of regular work
2. Calculate the employee’s total regular wages.
$26.38 x 40 hours = $1,055.20
3. Multiply the regular hourly rate by 1.5 to get the time and a half pay rate.
$26.38 x 1.5 = $39.57 per overtime hour
4. Calculate the total overtime wages
$39.57 x 8 hours = $316.56
5. Add regular and overtime wages.
$1,055.20 + $316.56 = $1,371.76
In this example, Lisa needs to get a total of $1,361.76 in wages that includes both regular wages and time and a half pay for 8 hours of overtime work.
Note that companies can choose to pay overtime based on the weekly work hours agreed upon and not necessarily by a 40-hour work week. For instance, Lisa’s employers can choose to start paying her overtime once she exceeds 36 hours.
Nondiscretionary bonuses should be included in the calculation of regular pay rate and time and a half pay. Here’s an example of how you can compute the overtime pay with a bonus.
For example, John earns $12 an hour, worked 48 hours this week, and received a bonus of $20 for perfect attendance. Here’s how to compute his regular pay and time and a half pay that accounts for that bonus.
1. Calculate the straight-time earnings for the week by adding the total number of hours worked plus the bonus.
$12 x 48 hours + $20 bonus = $596
2. Calculate the new regular hourly rate based on the straight-time earnings for the week.
$596 / 48 hours = $12.41 standard hourly rate
3. Multiply the new regular hourly rate by 40 to get the regular wages for the week.
$12.41 x 40 = $496.4
4. Calculate the hourly overtime rate by multiplying the standard hourly rate by 1.5.
$12.41 x 1.5 = $18.62 per hour of overtime
5. Multiply the hourly overtime rate by overtime hours worked.
$18.62 x 8 = $148.96
6. Add together the regular and overtime wages to determine total pay.
$496.4 in regular wages + $148.96 in overtime pay = $645.36
In this example, John should receive $645.36 in total wages, which accounts for the attendance bonus he was entitled to.
When computing time and a half pay with bonuses, it’s vital for human resources or payroll officers to first determine the period that the bonus covers, and it should be accounted for depending on that timeframe.
Calculating time and a half pay, given the different rules and conditions both on the federal and state level, can be confusing. While the overtime rate of 1.5 is straightforward, there’s that tendency to miscalculate time and a half pay. Here are some of the common challenges when calculating overtime pay:
Classifying employees correctly
It’s always a question of whether an employee is exempt or non-exempt to FLSA and time and a half pay. It’s easy to assume that only hourly employees are non-exempt, given the typical nature of their work, but it’s not as clear-cut as that.
Remember that being eligible for time and a half pay is determined by the wages earned and the nature of the tasks involved in the job. That means that even salaried employees can be eligible for overtime, making it crucial to understand the rules and exemptions on the state and federal levels.
Understanding specific state laws
According to FLSA, the minimum wage is $7.25 per hour. But state-based thresholds can vary quite a bit. For instance, the minimum wage in California is $14, and New York’s is $13.2. Meanwhile, states like North Carolina and New Hampshire have the same minimum wage as the federal government.
For instance, there’s also the fluctuating workweek method, which seems like an appealing way for employers to save on overtime costs. However, such a method has a lot of stipulations and can be prone to calculation errors. Furthermore, some states prohibit it, such as California. When that’s overlooked, it can result in potential lawsuits and violations.
Companies need to have a clear understanding of how both federal and state law impacts them. In the case of time and a half pay, the higher minimum wage is what should prevail.
Accounting for differing pay rates between teams/shifts
Obviously, time and a half pay must be based on accurate pay rates in the first place – this is easier said than done, especially for employees who might receive varying pay rates. With this in mind, you’ll need to must calculate time and a half pay rates according to the correct rates for every employee, no matter the team, shift, or role they work in.
Excluding nondiscretionary bonuses in the regular rate of pay
Bonuses, especially those that FLSA considered nondiscretionary, should be included in the computation of the regular rate of pay.
Nondiscretionary bonuses are predetermined in nature, such as attendance bonuses or bonuses for quality of work. Even if the employer has the option not to award the bonuses, it doesn’t mean that these incentives are discretionary. It’s nondiscretionary in nature because the employees are aware of the bonus and have an expectation of how and when they will receive it.
Calculating time and a half pay is not a walk in the park, and it can be daunting to understand the exemptions and rules under the FLSA and state-specific regulations. Workforce.com can help take out some of the tedious areas surrounding payroll accuracy. Here are some of the ways.
Accurate time and attendance tracking
When timesheets are accurate, it’s easier to compute wages and time and a half pay. Workforce.com can deliver that and more. Employees can clock in and out via kiosk or mobile device, and the system will automatically generate a digital timesheet for that in real-time, including overtime hours.
Automated labor compliance
Workforce.com is built with a robust compliance engine that helps pay staff accurately in compliance with labor laws. Aside from calculating total hours worked and overtime pay, it automatically complies with FLSA, maximum hour rules, and fair workweek.
Real-time wage tracking
Workforce.com provides complete oversight over your operations. For example, it can show you how much wages are incurred throughout the day and see potential overtime hours.
Alternative rate calculations
Aside from an employee’s regular pay rate, managers can assign alternative rates to teams or shifts on Workforce.com to help manage staff who work multiple roles. Whenever an employee works a specific role, the corresponding “team tag” automatically applies. This setup makes it easy to calculate time and a half pay even when juggling multiple pay rates for every employee.
Workforce.com integrates with leading payroll platforms to ensure a seamless workflow from timesheet to payroll processing. Because digitized timesheets are accurate and payroll platforms automate how wages are calculated and distributed, payroll becomes less time-consuming and prone to error.
We’re on a mission to automate workforce management for hourly employees and bring productivity, optimization and engagement to the frontline. Come see what we’re building in the world of predictive employee scheduling, superior labor insights and next-gen employee apps.
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