As a business owner, you're responsible for paying your employees correctly and on time. But keeping track of hours worked, overtime, and vacation days can be daunting. So to help you get payroll done with less stress, here’s everything you need to know about straight time pay.
Straight Time Pay Defined
Straight time pay is the total amount of money an employee earns in a pay period, not including overtime or other premium pay. So if your employees typically work 40 hours a week, they’d get their straight time rate for those hours.
How Do You Compute Straight Time Pay?
Before you can cut your employees a paycheck at the end of your pay period, you must know how to calculate their pay. To do that, you need two pieces of information:
1. The number of hours worked
2. The employee's hourly rate
Once you have those numbers, the calculation is simple. To get their straight time pay, multiply the total hours of work in the period by the hourly rate using this formula:
Straight Time Pay = Hours Worked x Hourly Rate
Here's a quick calculator you can use:
For example, let's say you have a weekly pay period and an employee worked 30 hours this week. Their hourly wage is $15. You could plug that info into the formula like this:
$450 = $30 x $15
For this pay period, your hourly employee earned $450. Since they didn’t put in any time over 40 hours, you don’t need to worry about paying overtime.
And though this calculation isn’t complicated, it can be time-consuming to calculate during each pay period. So if you're ready to eliminate the headache of trying to keep everyone’s wages straight, Hourly can help! They automate payroll so you can focus on running your business without trying to keep track of things like overtime and regular pay rates.
What’s the Difference Between Overtime and Straight Time?
So, if one of your employees typically earns $20 per hour, you’d have to pay them $30 per hour for any time over 40 hours. That’s because $20 x 1.5 = $30.
However, there are exceptions, which makes computing overtime a bit more challenging. Exempt employees don’t get paid overtime, while nonexempt employees must receive this premium payment. But what’s the difference between the two?
Exempt employees need to do certain tasks that are executive, professional or administrative in nature. These duties include things such as:
- Managing the work of at least two full-time employees
- Having the ability to make hiring/firing decisions
- Completing office or non-manual work related to general business operations
- Performing work that’s intellectual in nature
If an employee doesn’t do the things listed above, they may be considered nonexempt (and hence entitled to overtime). However, this is just a snippet of the qualifications. The list of exempt job responsibilities is quite long, so make sure to check it out before deciding what category an employee falls into.
Is Straight Time the Same as Hourly Pay?
No, this pay doesn’t necessarily equal your employee’s hourly pay. Straight time is your employee's regular pay for an entire pay period (not just for an hour's worth of work). Of course, if they only worked one hour in a pay period...then that would be their straight time pay.
Another difference? An hourly wage can include any overtime the employee earned. But, straight time doesn't take into account overtime. So if an employee's regular rate is $15 an hour but they worked more than 40 hours over the past week, their hourly wage would jump to $22.50 ($15 x 1.5). That wouldn't be counted toward their straight time pay.
Is Straight Time Pay Always Calculated Hourly?
No, you don’t need to always calculate this type of pay by using hours worked. If your nonexempt employees are paid by the day or week, you can still calculate their regular pay by using a slightly different formula.
For example, let's say you have an employee that earns $200 daily and you pay your team every two weeks. To calculate their regular pay, you would simply take their day rate and multiply it by the number of days worked in a pay period like this:
Straight Time Pay = Daily Rate x Days Worked in a Pay Period
$2,000 = $200 x 10 days
And that's it! You can calculate an employee's regular pay, regardless of their pay structure. You just adjust the math a bit and go from there.
But make sure that no matter how you pay your employees, they’re earning at least minimum wage per hour. If you’re unsure, take their daily or weekly rate and divide it by the number of hours they typically work. That number is the hourly rate they’d earn if you paid them that way, and it should be equal to or higher than the minimum wage for your state, municipality or the federal government–whichever is highest.
Are Salaried Employees Entitled to Both Regular and Overtime?
Regardless of what you may have heard, some salaried employees are entitled to regular and overtime pay. Why is that?
Just because you pay someone on a salary basis doesn't mean they meet the government's definition of an exempt employee. Remember, exempt employees are exempt from overtime because of their job duties. It’s not based on how you figure out their pay or what you call them.
So if you have a nonexempt salaried employee, they may still be entitled to their regular pay (and overtime too). Confusing, we know. But that's federal law for you!
If you have employees in this category, you simply divide their monthly salary by the number of hours they work each month. That will give you their hourly rate, which you can use to figure out any overtime payments.
Let's say you have a nonexempt employee with a salary of $3,000 per month. They typically work 160 hours monthly. To calculate their hourly rate, you would divide their monthly salary by the number of hours worked like this:
$3,000 / 160 hours = $18.75 per hour
Let’s say they worked 10 hours of overtime during this pay period. Here’s how you’d figure out their pay:
Regular Pay: $3,000
Overtime Pay: $18.75 x 1.5 x 10 hours of overtime = $281.25
Total Pay: $3,000 + $281.25 = $1,781.25
Can You Average Out Hours Worked Over Two Weeks to Avoid Paying Time and a Half?
Some employers try to save money by averaging hours worked across two workweeks. For example, let’s say you have an employee taking some time off next week. So you have them put in extra hours this week to make up for it.
They work 50 hours this week but only 30 the following week. And when you add those numbers together, they only worked 80 hours during your two-week pay period. That means no overtime, right?
Nope, that’s not how it works.
You have to pay your employee’s overtime rate of 1.5 times their regular hourly rate for all hours above 40 in a single workweek. So you owe them 10 hours of overtime for week one, even though they didn’t put in their regular hours during week two.
The only exception to this rule is if your employees are classified as exempt under the Fair Labor Standards Act (FLSA).
What Is Straight Time Overtime?
While it might sound like a contradiction in terms, it’s actually a thing. And once you understand how it works, you'll get why that is.
Let's say you have an employee who typically works 30 hours weekly. But, your company has an important presentation to give next week, and you need everyone to work extra hours to get things done.
So, your employee works 40 hours this week. That's 10 hours more than they usually do. Do they qualify for time and a half?
No. Since this employee isn't putting in more than a 40-hour workweek, they aren't legally eligible for time and a half pay. So instead, they'd get what's called straight time overtime.
It happens when employees work extra hours but aren't yet over the threshold for overtime compensation. In other words, they're still getting paid their regular rate of pay, but for more hours than they typically work.
This scenario doesn’t violate the government payroll rules but can strain your employees (and your budget). So, it’s best to avoid it if possible.
Pay Your Employees Correctly, Every Time
Labor laws can be confusing, but that's no excuse for not following them. It’s the right thing to do and will save you from costly penalties, back pay, and lawsuits later. That’s why it’s so important to correctly pay your employees every single time.
So now that you know what straight time pay is (and what it isn’t), it’s time to send out some paychecks and keep your employees happy!