How To Calculate Time and a Half - Joist (2024)

As a business owner, paying employees fairly is a key part of your job. And learning how to calculate time and a half is a step you can’t miss.

Time and a half, also known as overtime, is the extra pay employees get for working more than 40 hours in a week. It’s called time and a half because it’s usually 1.5 times the employee’s regular hourly wage.

If you’re wondering how time and a half is calculated and why it’s so important, here’s a quick guide.

FROM ONE OF OUR PARTNERS — Small Business Owner? You Can’t Afford To Ignore These Financial Tips

What Is Time-and-a-Half Pay?

Time and a half is the rate you pay employees for hours they work beyond the standard 40-hour workweek. The “half” refers to the extra 50% you legally have to pay on top of the employee’s regular hourly rate. For example, if an employee usually makes $10 an hour, their time-and-a-half rate is $15 an hour.

Overtime laws dictate how much you have to pay staff on top of their regular rate. These laws are part of the Fair Labor Standards Act (FLSA), which protects workers from exploitation. The FLSA also outlines minimum wage and recordkeeping laws. Some states have varying overtime regulations, so check the Department of Labor to confirm.

RELATED ARTICLE — What Is a Service Business?

Who Qualifies for Time and a Half?

Not all employees are eligible for overtime pay. Eligible workers are called non-exempt employees because they aren’t exempt from FLSA guidelines.

Non-exempt workers are usually lower-paid staff who work a varying amount of hours each pay period, while exempt ones are usually salaried and work set hours. Their higher salary covers compensation for all hours worked, including any beyond a typical 40-hour week.

Non-exempt employees are typically paid hourly and earn less than $844 per week or $43,888 per year, as of July 2024. This threshold includes many types of workers, such as:

• Manual laborers
• Retail workers
• Clerical staff
• Some professional and technical workers

Do your due diligence about which of your workers are considered exempt and non-exempt employees. Getting it wrong can lead to legal issues and fines. If you’re unsure about an employee’s status, consider consulting with an employment law expert.

RELATED ARTICLE — How To Price Subcontract Work

How To Calculate Time and a Half Pay

While most employees who qualify for overtime get paid hourly, some salaried people are eligible. Their salary just has to be below the FLSA threshold ($43,888 per year). Either way, calculating time and a half is usually straightforward.

For Hourly Employees

1. Find the employee’s regular hourly rate.
2. Multiply the hourly rate by 1.5 to get the overtime rate.
3. Subtract 40 from the total hours worked to get the number of overtime hours worked.
4. Multiply the overtime rate by the number of overtime hours worked.
5. Add the employee’s standard wages to their overtime wages to get their final amount for the week.

Let’s illustrate with an example. John works in retail and earns $12 an hour. Last week, he worked 50 hours. To calculate his overtime pay, first find his overtime rate by multiplying his regular hourly rate of pay of $12 by 1.5, which comes to $18 an hour.

Next, determine the number of overtime hours John worked by subtracting 40 from his total hours: 50 – 40 = 10 overtime hours. Multiply John’s overtime rate of $18 by the 10 overtime hours he worked, which equals $180.

Finally, add John’s overtime wages to his regular weekly pay: $480 + $180 = $660. John’s total pay with time and a half is $660.

For Salaried Employees

1. Find the employee’s weekly salary.
2. Divide the weekly salary by the number of hours the salary is intended to cover (usually 40) to get the regular hourly rate.
3. Multiply the hourly rate by 1.5 to get the overtime rate.
4. Multiply the overtime rate by the number of overtime hours worked.
5. Add the regular hourly pay to the overtime pay to get the total pay owed for the week.

For example, suppose Joan is a salaried administrative assistant who earns $1,000 a week. Last week, she worked 45 hours. To calculate her overtime pay, start by finding her regular hourly rate. Divide her weekly salary of $1,000 by 40 hours, which is $25 an hour.

Next, calculate her overtime rate by multiplying $25 by 1.5, which equals $37.50 an hour. Then, find the number of overtime hours Joan worked by subtracting 40 from her total hours: 45 – 40 = 5 overtime hours. Multiply Joan’s overtime rate of $37.50 by the five overtime hours, which comes to $187.50.

Finally, add the overtime wages to the regular wages: $187.50 + $1,000 = $1,187.50. Joan earned a total of $1,187.50 last week.

RELATED ARTICLE — How To Scale Your HVAC Business

Best Practices for Calculating Time-and-a-Half Pay

Here are some practical tips to help you navigate overtime calculations smoothly:

1. Know Your State Laws. Some states have overtime regulations that differ from federal law. For example, California requires overtime pay for employees who work more than eight hours in a single day. Familiarize yourself with your state’s rules to make sure you comply.
2. Use Accurate Time-Tracking. Record the hours your employees work, including overtime, with a reliable system. Accurate records help you calculate overtime pay correctly and protect your business in case of wage disputes or audits. This could be as simple as a paper timesheet or as advanced as dedicated time-tracking software.
3. Communicate Policies. Create a written overtime policy and share it with your employees. Clearly explain how you calculate overtime, who’s eligible, and if you need to approve employees working overtime. When everyone knows the rules, you avoid misunderstandings and disputes.
4. Factor in Bonuses. If you offer certain kinds of bonuses, like performance bonuses, the FLSA requires you to factor them into your calculations. But how does time and a half pay work when bonuses are involved? Add the bonus to the employee’s regular pay for the week. Then divide by the total hours worked to find the adjusted hourly rate, which is the original rate with the bonus on top. Use this adjusted rate to calculate overtime pay as normal, adding time and a half.

RELATED ARTICLE — Accepting Credit Card Payments as a Home Service Contractor

Make Collecting Payments the Most Efficient Part of Your Business

Learning how to calculate time and a half is simpler than it looks. And with Joist, collecting payments is just as easy.
Joist makes it incredibly simple to accept credit card payments from your clients. Simply issue your invoice, switch on Payments, and get paid. You cut cash flow delays and spend less time tracking down payments. Plus, you can collect down payments on-site.