How to Calculate Time and a Half

How To Calculate Time And A Half January 10, 2023

Priyanka Bhadani

Writer

How to Calculate Time and a Half

While many business owners pay their workforce a salary, others choose the hourly route due to a litany of benefits. Companies don't have to go through the complex process of classifying an exempt team member to comply with federal labor standards. There is no requirement to pay more than the minimum wage nor pay employees for time spent outside the office.

This can save a lot of money, which is particularly helpful to small business owners. Employees know they will be paid accurately for hours worked and they have the potential to earn overtime.

Speaking of overtime, what is it and how does it work? Though it depends on the state, most laws require an employer pay time and a half of hourly pay worked outside of the normal schedule. To better understand overtime and how it works, it helps to know the different types of hours a non-exempt or exempt team member can work. These include -

Full Time - Officially, full-time employment is anywhere from 35-40 hours, according to the Fair Labor Standards.
Part-Time - When a team member works fewer than 35-40 hours per week. This employee may be on a fixed schedule, rotation schedule, or swing shift schedule, depending on the type of company.
Overtime - Any hours worked by a non-exempt employee that is beyond the normal schedule. This means they are over the 35-40 hours per week
Salaried - An exempt employee is paid a fixed salary per year, regardless of how many hours he/she works. The schedule is typically a full-time work schedule of 35-40 hours per week, sometimes with overtime.

To calculate overtime pay for non-exempt team members, employers can use time tracking software and payroll software. Or, they can do things the old-fashioned way. Here is an overview of overtime hours, along with the best practices for calculating overtime pay.

Exempt vs. Non-Exempt Employees

In the United States, non-exempt employees are those who are paid an hourly wage. They either make less than 35,568 per year, are not salaried, or do not have exempt job roles. They must clock in and out each day so employers can track their time and pay them accurately. Non-exempt employees must be paid regular hourly pay and a half for anything over 40 hours. This is law, according to the labor standards act.

On the flip side, exempt employees are salaried. They make at least $35,568 per year, receive a salary, or have certain requirements that are classified as exempt. These job requirements are administrative or executive duties that help to maintain operations at a higher level. Those in sales are exempt if they only do sales work. Sales team members must spend work hours away from the organization to classify as exempt.

Calculate Overtime

Employers will typically only need to calculate time and work hours for non-exempt team members. For example, a non-exempt employee makes $15 per hour and works 45 hours per week. 5 of those worked hours are overtime. The employer should follow these steps -

1. Calculate Regular Earnings
Take the hourly rate and multiply it by total regular hours. For this example, the equation is $15 x 40 = $600 per week.

2. Calculate Time and a Half Pay Rate
The employee worked 5 hours of overtime. The company must pay him 1.5 times his regular hourly rate for those 5 hours. 1.5 x 15 = $22.5.

3. Multiply Pay Rate By Overtime Hours Worked
Next, the employer should multiply the number of overtime hours (5) by the time and a half pay ($22.5). This comes out to $112.5

4. Add it All Together
Finally, the employer needs to add the overtime total pay to the regular wages to calculate the total gross pay for one week. This equation is $112.5 + $600 = $712.50

Salaried Overtime Pay with Fixed Hours

While most salaried team members aren't paid for overtime, those with fixed hours are. The equation is similar to the non-exempt employee, except the employer needs to convert the employee's regular earnings into an hourly rate to finish the formula.

For example, if a team member is paid $1000 per week at a fixed salary rate, the employer would divide that number by the usual hours worked to determine the hourly rate of pay. Then, the rest of the equation follows the same pattern as the non-exempt team member.

Example
Employee Works 45 hours, 5 of those are overtime. Is paid a regular rate of $1000 per week
Hourly Rate of Pay = $1000 / 40 = $25.00 per hour
Overtime Pay = $25 x 1.5 = $37.5, $37.5 x 5 = $187.50
Total Pay Per Week = $1000 + $187.50 = $1,187.50

Key Takeaways of How to Calculate Time and a Half

Here is what to know when an employee works more hours than originally scheduled. Also, here is how an organization can calculate double-time according to federal law -

There are full-time hours, part-time hours, overtime pay, and salaried employees. Non-exempt team members are paid an hourly rate. They are also paid an overtime rate of 1.5 times the regular wage rate.
To calculate overtime rate with an overtime calculator, employers should first calculate regular earnings. They can then calculate the time and a half pay rate for any overtime wages.
Next, the employer should multiply the pay rate by overtime hours worked and then add the regular wages to the overtime pay to get a total for all work hours.
To calculate overtime pay for salaried employees on a fixed schedule, employees should follow the same formula, but convert weekly salary to an hourly rate. They can do this by dividing the total weekly salary by the number of regular hours worked.