# How to Calculate the Hourly Rate of Pay for Time and a Half

Federal provisions for overtime pay are contained in the Fair Labor Standards Act. The FLSA states that most employees, including temps, must be paid time and a half for hours worked over 40 in one week. The hourly rate for overtime, then, is 1.5 times the regular hourly rate. But the employer is not required to pay overtime for some very specific types of employees.

## Displaying the Overtime Pay on the Paycheck

Most businesses generally reflect the overtime payments in one of two ways on an employee's paycheck:

• Showing hours up to 40 on one line at the regular rate and hours over 40 on a second line at the overtime rate
• Showing all of the hours worked (even those over 40) on one line multiplied by the regular rate and the hours over 40 on a second line at the overtime premium rate

This is a display preference in that it affects only how the calculation is shown but does not affect the amount calculated. There could be a variety of reasons that management, HR or the payroll processor wants the paychecks to be displayed, one way or the other. In industries where employees are paid different rates for working different shifts, for example, it may be easier to ensure the correct amount of overtime is being paid if the rates are on separate lines.

## Worked Calculation Example

Assume a cashier is paid \$9.50 per hour and she worked 52 hours one week. At \$9.50, her overtime hours would be compensated at \$14.25 per hour. This is a difference from (premium over) her regular rate of \$4.75.

Overtime Rate: In this method, the cashier's 40 hours would show on the first line at \$9.50 per hour. On a second line, the 12 overtime hours would show at \$14.25 per hour. The cashier's total pay before deductions would be (9.50 x 40) + (14.25 x 12) = \$551.

Overtime Premium: In this method, the cashier's 52 hours would show on the first line at \$9.50 per hour. This would be the "time" part of the time-and-a-half rate for those overtime hours. The second line would have the overtime hours worked only, paid at the "half" part of the time-and-a-half rate. This is typically called the overtime premium, or the difference between the regular rate and the overtime rate. The cashier's total pay before deductions would be (9.50 x 52) + (4.75 x 12) = \$551

## Who are Exempt Employees?

The employer is exempt from paying overtime to very specific types of employees. These include executive, administrative, professional and outside-sales employees as well as certain computer employees. There are certain tests that must be met to forgo paying overtime. Independent contractors, sometimes also called freelancers, or contract laborers, are also exempt from the overtime requirement. These individuals are often, but not always, paid by the project rather than based on hours or a salary and are technically not employees of a company.

Employers must be careful not to misclassify an employee as a contractor merely to avoid paying him overtime or paying payroll taxes on the person's wages. Employers should also be careful not to accept work from the same individual through multiple temp agencies if the total exceeds 40 hours per week. They will have joint liability along with the temp agency for complying with FLSA regulations for that employee.
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