Time and a Half: How to Calculate It Correctly
Time and a half is 1.5 times the regular rate, and the regular rate is not the hourly wage. How to calculate it, what must be included, and state rules.
Time and a Half
One and a half times the regular rate, and almost every underpayment in small business payroll comes from the second half of that sentence. What goes into the regular rate, four worked examples including the salaried non-exempt case, the states that require it daily, and the holidays it does not apply to
Time and a half sounds like the simplest calculation in payroll: take the hourly rate, multiply by one and a half, apply to hours over forty. Plenty of small businesses do exactly that, and the ones that also pay a promised bonus or a shift differential are underpaying. This guide shows you how to calculate it correctly.
The reason they underpay is in the definition, and it is easy to miss. The multiplier applies to the regular rate, and the regular rate is not the hourly wage. It is everything the employee earned that week for working, divided by the hours they worked, which means a $2 shift differential or a small production bonus quietly raises every overtime hour in the period.
I'll walk through what goes into the regular rate, four worked examples including the salaried non-exempt case people get wrong, the states with daily overtime, what time and a half is not owed for, and the new reporting line on the W-2.
I build the people and records tooling for businesses without an HR department at FirstHR, and FirstHR is an onboarding and HR platform rather than a payroll provider. This is general information, not legal advice.
What Time and a Half Is
Time and a half is a pay rate of one and a half times an employee's regular rate, owed for overtime hours. Federal law, the Fair Labor Standards Act (FLSA), sets the trigger at more than 40 hours worked in a workweek for employees who are not exempt.
Two structural points follow from that. First, overtime is calculated per workweek and never averaged across two weeks, so an employee who works 50 hours one week and 30 the next is owed overtime for the first week regardless of the two-week total.
Second, the workweek is whatever fixed seven-day period you established. It does not have to start on a Monday, but it does have to be consistent (29 CFR 778.105).
When It Is Owed
You owe time and a half on overtime hours worked by a non-exempt employee, so the classification question comes first: it decides everything after it.
Exempt status takes two things: a job that passes a qualifying duties test, and a salary at or above the federal threshold. That threshold stands at $684 per week. The 2024 rule was vacated, and the Department of Labor restored the earlier salary levels in May 2026 (29 CFR 541.600).
Paying somebody a salary does not by itself make them exempt, and the belief that it does can build into large back-pay exposures at small companies.
Hours worked is the other term doing real work. It means time the employee was actually working, which excludes paid time off and holiday pay for days not worked. An employee who takes eight hours of holiday pay and works 36 hours has 36 hours worked and no overtime, even though the paycheck shows 44 paid hours.
The Regular Rate, Which Is Not the Hourly Wage
The regular rate is total straight-time compensation for the week divided by hours worked, and a great many pay components fold into it (29 CFR 778.109). This is the sentence that costs money.
The item in the first list that catches small employers hardest is the nondiscretionary bonus, because almost every bonus a small business pays is nondiscretionary. If it was promised, announced, or driven by a formula, it belongs in the regular rate for the period it covers (29 CFR 778.208). The overtime already paid for those weeks then has to be recalculated upward.
The other frequent error runs the opposite way: treating holiday and vacation pay as though it counted toward the 40-hour threshold. It is pay for time not worked, it does not enter the regular rate, and it does not push anybody into overtime. The Department of Labor's Fact Sheet 56A sets out the full list of payments that stay out.
Four Worked Examples
The arithmetic is easier to see than to describe, and the third example is the one worth reading twice.
The $98 in the third example is not a penalty for paying a $92 bonus. It is the correct calculation: the bonus raised the regular rate that the overtime hours are priced from. The extra cost is invisible to anybody who treats a weekly bonus as a fixed cost.
A bonus that covers a longer period works the same way. It is apportioned back across the weeks it was earned in, and each week's overtime is recalculated (29 CFR 778.209).
How Much Time and a Half Is at Common Hourly Rates
When the wage is the only thing the employee earned that week, the wage is the regular rate and the overtime rate is that number multiplied by 1.5. The table below is the shortcut for that clean case. It stops being correct the moment a differential, commission, or promised bonus lands in the same week.
| Hourly wage | Time and a half | 4 overtime hours | 10 overtime hours |
|---|---|---|---|
| $10.00 | $15.00 | $60.00 | $150.00 |
| $12.00 | $18.00 | $72.00 | $180.00 |
| $15.00 | $22.50 | $90.00 | $225.00 |
| $18.00 | $27.00 | $108.00 | $270.00 |
| $20.00 | $30.00 | $120.00 | $300.00 |
| $25.00 | $37.50 | $150.00 | $375.00 |
| $30.00 | $45.00 | $180.00 | $450.00 |
| $35.00 | $52.50 | $210.00 | $525.00 |
| $40.00 | $60.00 | $240.00 | $600.00 |
Use it to sanity-check a payroll run, not to build one. Plenty of employees at a typical small business earn something besides the wage in a given week, and for them the rate has to be rebuilt from that week's total pay before the multiplier goes anywhere near it.
Salaried Non-Exempt Employees
A salary is a way of paying somebody, not a classification. An employee who is paid a salary but does not meet a duties test, or is paid below the federal threshold, is non-exempt and is owed overtime like anybody else.
The calculation converts the salary to an hourly regular rate. Where a weekly salary is intended to cover 40 hours, divide by 40. The salary has already paid straight time for those hours, so the overtime hours are paid at one and a half times the resulting rate.
When Time and a Half Is Not Owed
Several situations that feel like they should trigger a premium do not, at least not federally. The Department of Labor puts it in one line in Fact Sheet 23: the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, as such.
| Situation | Federal requirement | Note |
|---|---|---|
| Work on a federal holiday | None | Holiday premiums are policy or contract, not law |
| Work on a Saturday or Sunday | None | Weekend premiums are equally a matter of policy |
| Night shifts | None | A differential is optional, but it raises the regular rate once offered |
| A ninth hour in a day | None federally | Several states require daily overtime, which changes this answer |
| 45 hours in week one and 35 in week two | Overtime owed for week one | Weeks are never averaged |
| An exempt employee working 60 hours | None | Provided the duties test and salary threshold are genuinely met |
The first two rows produce the most disagreements, and the answer is not the one employees expect. Holiday and weekend premiums are extremely common, entirely voluntary, and become binding once you have promised them in a handbook or a contract.
Daily Overtime States
Federal law sets a floor, and several states go beyond it, most significantly by requiring overtime on a daily rather than only a weekly basis. Alaska, California, and Colorado apply a daily rule to covered employees generally, Nevada applies one only to employees paid under 1.5 times the state minimum rate, and Oregon adds one for manufacturing.
| State | Daily overtime starts at | Conditions and extra tiers |
|---|---|---|
| Alaska | Over 8 hours in a day | Employers with four or more employees |
| California | Over 8 hours in a day | Double time past 12 hours in a day; on the seventh consecutive day in a workweek, time and a half for the first 8 hours and double time after |
| Colorado | Over 12 hours in a day, or 12 consecutive hours | Whichever of the daily, consecutive-hour, and weekly calculations pays most |
| Nevada | Over 8 hours in a day | Only for employees paid less than 1.5 times the state minimum rate |
| Oregon | Over 10 hours in a day | Manufacturing establishments only |
The California rule is the one most growing businesses meet first: time and a half past 8 hours, double time past 12, and a further premium structure on the seventh consecutive day in a workweek (California Department of Industrial Relations). Alaska uses the same 8-hour trigger but reaches only employers with four or more employees.
Nevada reserves its daily rule for lower earners, those paid less than 1.5 times the state minimum rate, and drops it when employer and employee agree to a schedule of 10 hours a day across four days. Colorado triggers at 12 hours in a day or 12 consecutive hours, whichever calculation pays the employee most.
Oregon is the narrow one: 10 hours in a day, and only inside a manufacturing establishment, which the state defines as using machinery to turn materials into new products. An office or retail schedule there runs on the 40-hour weekly rule alone.
Where a state requires overtime after a set number of hours in a day, an employee can be owed a premium in a week where they never reached 40 hours. Where federal and state rules both apply, the employee receives whichever calculation produces the greater payment.
For a business operating in more than one state, one company-wide rule cannot handle this. A scheduling practice that is entirely lawful in one location can create daily overtime in another. The state labor agencies linked above publish the current rule, which is the version to build a schedule against.
The New W-2 Line
A federal deduction now exists for qualified overtime compensation, and the part that matters to an employer is not the deduction itself but the reporting it requires. According to the Internal Revenue Service, the employee deducts the pay that exceeds their regular rate, up to $12,500, or $25,000 on a joint return.
Qualified overtime compensation is only the premium portion the FLSA requires: the amount paid above the employee's regular rate for hours over 40 in the workweek, not the whole overtime payment. In time and a half, it is the half.
Employers report the qualified premium separately on the W-2 in box 12 under the new code TT, beginning with tax year 2026, which means the premium has to be tracked as its own number rather than folded into gross wages (IRS instructions for Forms W-2 and W-3).
Premiums you owe for any reason other than the FLSA do not count as qualified overtime. IRS Fact Sheet 2026-13 (August 2026) excludes overtime owed purely under a state daily rule, a union contract, or your own holiday policy. It also excludes the part of a double-time payment above time and a half.
The new reporting has two practical consequences for you. First, your payroll needs to be producing that premium figure now rather than in January, because reconstructing a year of premium amounts retroactively is unpleasant.
Second, withholding does not change by default. Overtime stays subject to federal income tax withholding, and the same fact sheet lets an employer reduce it only when the employee hands in a new Form W-4 that accounts for the deduction.
If your payroll reports do not yet break the premium out on their own, keep it by hand from the next pay period rather than waiting to find out in December. One row per employee per workweek with overtime on it, and a second sheet that totals the premium column per person at year end.
| A | B | C | D | E | F | G | H | I | J | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Employee | Workweek ending | Hours actually worked | Regular rate for that week | Hours over 40 | Overtime pay at 1.5 | Premium half to report separately | Pay date | Running total of premium for the year | Checked against the payroll report on |
| 2 | ||||||||||
| 3 | ||||||||||
| 4 | ||||||||||
| 5 | ||||||||||
| 6 | ||||||||||
| 7 | ||||||||||
| 8 | ||||||||||
| 9 | ||||||||||
| 10 | Formula | Premium half = regular rate x 0.5 x hours over 40. That half is the figure reported separately, not the whole overtime payment | ||||||||
| 11 | Rule | One row per workweek, not per pay period. The regular rate is a weekly figure, so a two-week period gets two rows | ||||||||
| 12 | Rule | The regular rate column comes from that week's total straight-time pay divided by hours worked, so fill it in after any differential or bonus is known | ||||||||
| 13 | Rule | When a nondiscretionary bonus lands after the fact, recalculate the affected weeks and add a row for the added premium |
Where Small Employers Get This Wrong
Six patterns, and the first two are the ones that compound, because they touch every overtime hour.
Multiplying the base hourly wage instead of the regular rate is first. Any shift differential, commission, or nondiscretionary bonus makes this wrong, and it is wrong every single overtime hour.
Not recalculating after a nondiscretionary bonus is second. It is the same error arriving later, and it accumulates across every overtime hour in the bonus period.
Averaging hours across two weeks is third. Fifty hours followed by thirty is not two forty-hour weeks; it is one week with ten hours of overtime owed.
Treating salaried as exempt is fourth. Exemption needs a duties test and a salary at or above the federal threshold, and the salary alone establishes nothing.
Counting holiday and vacation pay toward the 40 is fifth. It is the one error that runs in the employee's favor, and it still needs fixing, because inconsistency is its own problem.
And offering comp time in place of overtime is last. It is available to public agencies under the conditions in Fact Sheet 7 and generally not to private ones, and the version most small businesses have in mind is not permitted. Managing hours within the same workweek is the lawful equivalent.
Frequently Asked Questions
How do you calculate time and a half?
Multiply the employee’s regular rate by 1.5 and pay that rate for every hour worked over 40 in the workweek. The step people get wrong is the regular rate, because it is not necessarily the hourly wage. It is everything the employee earned for straight-time work that week, divided by the hours they actually worked, so nondiscretionary bonuses, shift differentials, and commissions all go into it. For a straight hourly employee at $20 with no extras, time and a half is $30. Add a $2 shift differential and it becomes $33, because the regular rate rose to $22.
What is the regular rate of pay?
The regular rate is the employee’s total pay for the workweek divided by the total hours they worked that week. Hourly wages, nondiscretionary bonuses, shift differentials, commissions, piece rate earnings, and on-call pay all count toward it. Genuinely discretionary bonuses, gifts, reimbursed expenses, employer benefit contributions, and pay for time not worked, such as holiday and vacation pay, are left out. With that many components counting, the regular rate often ends up above the base hourly wage, which is why overtime calculated on the base wage comes out short.
When is time and a half required?
Under federal law, it is required for all hours a non-exempt employee works over 40 in a single workweek. The employer sets that workweek as a fixed, regularly recurring stretch of seven consecutive 24-hour days, and hours cannot be averaged across two weeks to avoid overtime. Several states add a daily requirement on top of the weekly one, most prominently for hours over eight in a day. When both the federal and the state rule apply, the employee is paid under whichever one gives the larger amount.
Do you have to pay time and a half for holidays or weekends?
Not under federal law. There is no federal requirement to pay a premium for work on a holiday, a Saturday, a Sunday, or a night shift. Those premiums are common as a matter of policy or contract, and once promised they become an obligation you have created. Two related points: holiday pay for a day not worked does not count toward the 40 hours that trigger overtime, and a premium already paid at time and a half for weekend work can generally be credited against overtime owed for the same hours.
Does a bonus change the overtime rate?
A nondiscretionary one does. Any bonus that was promised, announced in advance, or tied to a formula such as production, attendance, or hitting a target has to be counted in the regular rate for the weeks it covers. That means overtime already paid for those weeks was figured on too low a rate and needs topping up. A $92 weekly production bonus paid to somebody who worked 46 hours costs $98 rather than $92, because it lifts the regular rate that all six overtime hours are calculated on. A truly discretionary bonus, where nothing was promised and the decision came after the fact, stays out.
How does time and a half work for a salaried employee?
If the employee is non-exempt, salary does not remove the overtime obligation. Convert the salary to a regular rate by dividing it by the number of hours it was intended to cover, then pay 1.5 times that rate for hours over 40. A $900 weekly salary covering 40 hours gives a regular rate of $22.50 and an overtime rate of $33.75. Being exempt takes two things at once: a job that passes a duties test and a salary at or above the federal threshold of $684 per week. A salary on its own never settles the question.
Can you give comp time instead of paying time and a half?
Private sector employers generally cannot. Compensatory time off in place of overtime pay is available to public sector employers under specific conditions, but not to most private businesses. For them, overtime earned in a workweek is generally due on the regular payday for the period in which that workweek ends. What a private employer can do is manage the schedule inside the workweek, adjusting hours within the same week so the total does not go over 40. Moving hours across two different workweeks to average them out is not permitted.
Is overtime pay taxed differently?
Overtime pay is ordinary wages, so it is withheld on and taxed like any other pay. The only way to withhold less on it is for the employee to submit an updated W-4 that claims the expected deduction. Separately, a federal deduction now exists for qualified overtime compensation. It covers the premium the FLSA requires above the regular rate, up to an annual limit and subject to income phase-outs, and non-exempt employees can take it for tax years through 2028. For employers the practical consequence is about reporting: qualified overtime compensation has to be shown separately on the W-2, so the premium half needs to be kept as a standalone number instead of disappearing into gross wages.