If your organization employs hourly workers, running payroll requires a detailed understanding of how PTO, seasonal holidays, and more factor into their paychecks.
You want your employees to be paid correctly and on time, and as your organization grows, it gets harder to track all of the different variables that affect payroll—like overtime.
If any of your employees work overtime, then you likely owe them time and a half. But what is time and a half, and how do you calculate it?
Time and a half is the amount your employee is paid hourly, plus half that amount for each hour worked overtime. The Fair Labor Standards Act determines overtime pay requirements that overtime may not be less than time and a half an employee’s hourly rate. This ruling was passed to ensure organizations appropriately compensate employees that worked more than the set standard of 40 hours per week.
According to the U.S. Department of Labor, “Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.”
It is important to note that overtime applies on a workweek basis. The workweek is seven consecutive 24-hour days. So if an employee’s workweek runs from Tuesday to Tuesday, overtime is anything over 40 hours within that 168-hour span.
Employees can have different workweeks compared to one another, and “overtime pay earned in a particular workweek must be paid on the regular payday for the pay period in which the wages were earned.”
When calculating overtime pay, use this formula:
time and a half = standard hourly rate x 1.5
While using this formula is straightforward for hourly employees, salaried employees are trickier to calculate.
For hourly employees, take the standard hourly rate and multiply that amount by 1.5. Then, multiply that total by the number of overtime hours worked. That will give you the overtime pay of your hourly employee.
For salaried employees, things work differently. For salaried employees to be eligible for overtime, they must make below a certain threshold—$35,568 per year, or below $684 per week. To calculate overtime pay for a salaried worker, take the standard weekly salary and divide it by the number of hours they typically work, giving you the standard hourly rate. Then, take the hourly rate total and multiply it by the number of hours worked overtime. That will give you the overtime pay of your salaried employee.
For hourly employees:
It’s the busy summer season at a beach-side clothing store, and Selene has worked 56 hours during her 40-hour workweek. She is paid $10.50 per hour, and overtime pay is time and a half.
56 - 40 = 16, so Selene worked 16 hours overtime.
10.50 x 1.5 = 15.27, so Selene’s time-and-a-half rate is $15.75.
15.75 x 16 = 252, bringing Selene’s overtime total for the workweek to $252.
Selene worked the standard 40 hours, which at an hourly rate of $10.50, totals $420.
420 + 252 = 672, so Selene is owed $672 for this workweek.
For salaried employees:
Q4 is coming to an end, and Trey is pulling some serious overtime to close out tax needs in an accounting firm. Trey has worked 68 hours this workweek. His standard salary is $35,000 yearly.
35,000 / 52 = 673, so Trey’s standard weekly salary is $673.
673 / 40 = 16.83, so Trey’s standard hourly rate is $16.83.
16.83 x 1.5 = 25.24, so Trey’s overtime rate is $25.24.
Now, to calculate how much overtime Trey is owed for this workweek.
68 - 40 = 28, so Trey worked 28 hours overtime.
25.24 x 28 = 706.72, bringing Trey’s overtime total for the workweek to $706.72.
Trey worked the standard 40 hours, which at an hourly rate of $16.83, totals $673.
673 + 706.72 = 1,379.72, so Trey is owed $1,379.72 for this workweek.
Calculating time and a half, or overtime pay in general, if you award more than the standard, ensures your workforce is fairly compensated for extra hours worked. If you’re concerned about calculating overtime correctly, especially as your organization grows, consider using payroll software to do the work for you.
BerniePortal’s Payroll feature uses our native time and attendance feature to tally overtime, withdraw taxes, and deliver your employees an accurate and timely direct deposit every pay period. Calculating payroll is time-consuming, and the risk of error rides the potential of not paying your employees—losing you valuable talent or causing legal issues. BerniePortal relieves your payroll headache so you can run payroll the right way—every time.
You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources: