For human resources, keeping track of employees’ working hours is a definite priority. Many HR professionals need to know: What is time and a half pay? And how should I keep track of employee overtime?
Time and a half refers to the increased rate of pay that an eligible employee receives when they work overtime and/or exceed the 40-hour working week. Essentially, this means that they receive 50% more than their standard hourly rate for each hour worked over the standard working week. There are exceptions, however, as not all employees are entitled to overtime pay. There are also variations in certain states as some choose to enforce additional terms and obligations not included in the Fair Labor Standards Act (FLSA).
As an employer, it is imperative to understand the rules surrounding time and a half. Failure to comply with timekeeping requirements and wage and hour laws can result in hefty fines. For example, a recent Federal investigation recovered nearly $100,000 in pay for 53 employees of a Danville-based health care company (California) after employees were not paid time and a half when working more than 40 hours in a week.
In this article, we will break down what time and a half is, which employees qualify for it, and how you need to calculate it when submitting payroll. We will also share an overtime tracker excel and discuss the benefits of using software to manage time and attendance in your company and ensure compliance with US employment laws.
- What is Time and a Half?
- How Does Time and a Half Work?
- Time and A Half Exemptions
- How to Calculate Time and a Half
- Tracking Overtime Hours in Excel
- How to Keep Track of Overtime Hours with Software
What is Time and a Half?
Time and a half refers to the increased hourly rate that employees working overtime are entitled to receive, as established by the Fair Labor Standards Act (FLSA). According to The Department of Labor website, non-exempt employees covered by the FLSA must receive overtime pay for all hours worked outside of their normal 40-hour working week, at a rate of an additional 50% of their regular hourly rate of pay.
There have been several changes to overtime laws in the US over recent years which employers need to be aware of. For example, on September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. This ruling updated the earnings thresholds necessary to exempt executive, administrative and professional employees from the FLSA minimum wage and overtime pay requirements, and it means that employers are now able to count a portion of certain bonuses/commissions towards meeting the salary level.
In addition to this, certain states take the FLSA’s overtime rules a step further to enforce overtime pay for employees who work more than eight, nine, or 10 hours a day, as is the case in California. The California Labor Code section 510 also states that any employee that works over eight hours in a workday is also entitled to time and a half. It is always best to check your state’s labor department to ensure you are in compliance with local labor regulations.
How Does Time and a Half Work?
Under the FLSA, you must pay time and a half for any hours your employees work over the standard 40-hour working week. However, whether or not you are obligated to pay your employees overtime pay depends on their status. They can be either considered exempt or nonexempt employees. We will discuss eligibility requirements shortly, but for now, let’s start by looking at how time and a half works.
- Time and a half applies when an employee exceeds 40 hours during a workweek.
- Some states have laws requiring time and a half for employees working more than 8 hours, as with the example of California seen above.
- You are not obligated to pay employees for any work they undertake on official holidays. This includes bank holidays like Labor Day, Independence Day, Easter, Memorial Day, New Year’s Day, and Christmas.
- Time and a half overtime pay is subject to the same tax deductions as regular hourly wages. This includes employer payroll taxes such as FUTA and one-half of Medicare and Social Security on the full amount of an employee’s paycheck.
Time and A Half Exemptions
Many factors determine whether or not an employee is eligible to receive overtime pay. These factors include whether an employee is hourly or salaried, the salary amount an employee receives, and an employee’s duties and responsibilities. It’s important to understand the status of your employees as exempt or nonexempt in their contracts of employment. This ensures there is no confusion later down the line and reduces the chances of an employee dispute.
The main difference between nonexempt and exempt employees is that nonexempt employees can earn overtime pay and exempt employees cannot. It is your responsibility as an employer to demonstrate whether or not your employees are eligible.
Consider the following…
Exempt employees (not entitled to time and a half):
- Usually include so-called white-collar exemptions. This includes executives, administrators, professionals, outside sales representatives, and computer professionals
- Are paid salaries (not paid hourly)
- Earn more than the FLSA exempt minimum ($43,888 annually)
Nonexempt employees (entitled to time and a half):
- Make less than $43,888 per year
- Are not salaried (they are paid by the hour)
- Do not have exempt job duties (not included in the above list)
However, as there are additional overtime laws in certain states, it is important to establish your local regulations to ensure compliance. You can find more information on overtime laws by state here.
How to Calculate Time and a Half
You must pay all your non-exempt employees time and a half for any overtime hours they work. However, as nonexempt employees can be salaried, you need to know how to calculate time and a half for both salaried and hourly employees.
Calculating time and a half for hourly employees
The time and a half formula:
(Standard Hourly Rate) × 1.5 = Time and a Half Rate
This equation gives you the hourly time and a half rate for non-exempt employees. You then need to multiply this rate by the number of overtime hours the employee worked.
Calculating time and a half for salaried employees
For non-exempt salaried employees who work fixed hours, first, you need to establish what their hourly rate would be. You can do this by dividing their weekly salary by the number of hours they typically work.
Once you have this figure, you can calculate overtime pay for salaried employees using the time and a half formula above.
Tracking Overtime Hours in Excel
Using an overtime tracker can be an effective way to keep track of time tracking in your company. Having a reliable system for keeping an accurate record of employee time and attendance is especially relevant with the increasing popularity of flexible working hours and remote work. It helps you keep on top of the hours worked by each employee. It also helps you comply with legal obligations relating to time tracking, working hours, and breaks.
With Factorial’s downloadable overtime tracker Excel template, you can manage your employees’ time and attendance from a simple spreadsheet. Your employees can use them to keep track of their daily working hours, breaks, and overtime. This makes it much easier for you to calculate payroll at the end of each pay period.
How to Keep Track of Overtime Hours with Software
Using an overtime tracker Excel can be a great solution for keeping track of time and a half. However, entering data in Excel can become a tedious task and can take up a lot of precious time.
Why not save yourself the headache of managing employee hours and let Factorial keep you on track with its time attendance software? Our time tracking software can help you improve your workforce management. And it’s a great way to ensure you have accurate and up-to-date records at all times.
Factorial’s cloud-based software allows you to automate and digitize your company’s time & attendance. Our simple and intuitive time tracking app allows employees to clock in/out from their mobile app or using a QR code through the entrance app. You can review overtime hours for each employee at the click of a button. You can also extract reports so you can keep better track of employee hours and control labor costs. Plus, the app uses geofencing features to monitor if your employees clock in/out from outside the workplace. And at the end of the month, managers can review and approve timesheets before you process payroll. Simple!
