Are You Paying Employees Fairly? Understanding Time and a Half

Published Wednesday 10 September 2025

Table of contents

• What is time and a half?
• When do you need to pay overtime?
• Who qualifies for overtime pay?
• Ways to avoid common mistakes with overtime pay
• How much is overtime pay in your state? States with additional rules
• Stay compliant with small business payroll software
• FAQs on overtime pay rates and compliance

Key takeaways

• Time and a half is a regular hourly wage plus half.
• Federal law requires you to pay time and a half if employees work more than 40 hours a week.
• There are exemptions for some salaried managerial, administrative, professional, or creative employees.
• Hospital or residential care employees, as well as law enforcement or fire protection employees, are subject to different rules.
• States may have additional overtime rules – check with your local state authority or tax department.
• Payroll software can help you track hours and stay compliant.

What is time and a half?

Time and a half is a regular hourly wage plus half – if your employee earns $20 an hour, their overtime rate is $30. It's pretty straightforward for hourly employees, but figuring out how to calculate time and a half is more complicated for non-exempt salaried employees.

When do you need to pay overtime?

According to the Fair Labor Standards Act (FLSA) overtime rules, you must pay employees overtime whenever they work more than 40 hours in a week. For example, if a non-exempt employee works 50 hours in a week, you must pay them 10 hours at time and a half.

You can use any period of seven consecutive 24-hour periods as your week – but you must be consistent.

Here’s more information from the Department of Labor on overtime pay.

Who is exempt from overtime pay?

Although hourly employees (and some salaried employees) are usually covered by overtime pay rules, you don't have to pay them overtime if they meet these exemptions.

• Salaried executive employees who work in a management role with a salary of at least $684 a week. They must supervise at least two or more full-time employees or the equivalent, and have the authority to hire or fire new employees.
• Administrative employees paid a salary or fee who work in management or general business operations, in a non-manual labor rule, with a salary of at least $684 a week.
• Professional or creative employees paid on a salary or fee basis who do work that requires advanced intellectual knowledge or invention, originality, or talent. Their salary or fee must be at least $684 a week.
• Computer employees paid a salary or fee who are paid at least $27.63 an hour or $684 a week. They must work as a skilled computer systems analyst, programmer, engineer, or in a role that requires similar skills.
• Outside sales employees who work away from the employer's place of business in a sales capacity.

For example, you hire a manager to oversee five staff and pay them $1000 a week. The manager meets the criteria of a salaried executive employee, so whether they work 41 hours or 100 hours, you don't have to pay them overtime or anything other than their salary.

Or perhaps you hire an IT specialist at $30 an hour – their job meets the exemption criteria and their hourly rate is above the threshold. They get their standard hourly rate regardless of how many hours they work.

For more on the FLSA rules, check out this Department of Labor factsheet.

Overtime rules for workers in different sector

Some industries have unique overtime rules that differ from the standard 40-hour workweek. Here’s how they apply.

Healthcare workers

Hospitals and residential healthcare facilities may qualify for a special overtime calculation called the “8 and 80 rule”—but only if employees agree to it in advance.

Under this rule, you pay overtime only when a healthcare worker:

• Works more than 8 hours in a single day, or
• Works more than 80 hours in a 14-day work period

Example 1: An employee works 20 hours one week and 60 the next, never exceeding 8 hours a day. Under the 8 and 80 rule, no overtime is due.

Example 2: A nurse works 80 hours over two weeks, but five of those shifts are 16 hours long. You must pay 40 hours at the regular rate and 40 hours at time and a half, because daily hours exceeded 8.

You can apply the standard overtime rules to some employees and the 8 and 80 rule to others. If you switch methods, calculate pay both ways during the transition period and pay whichever amount is higher. After that, you can use the new method going forward.

Law enforcement and fire protection employees

Public agencies with fewer than five law enforcement or fire protection employees can use a special overtime schedule instead of the standard 40-hour workweek.

Overtime applies when employees work more than the maximum hours allowed for the work period you choose:

• 28-day period – 212 hours for fire protection employees, 171 hours for law enforcement
• 14-day period – 106 hours for fire, 86 hours for law enforcement
• 7-day period – 53 hours for fire, 43 hours for law enforcement

This rule gives agencies flexibility to align overtime thresholds with unique shift patterns while staying compliant with federal labor laws.

Common mistakes to avoid with overtime pay

Failing to calculate or pay overtime correctly can harm employee trust and lead to costly penalties. To stay compliant, avoid these common mistakes:

• Assuming salary means exempt status – Salaried employees must still receive overtime unless their duties meet exemption criteria under the FLSA.
• Not paying for unauthorized overtime – If a non-exempt employee works more than 40 hours in a week, you must pay overtime, even if the extra hours weren’t approved.
• Miscalculating the overtime rate – In addition to the regular hourly or salaried rate, you must include non-discretionary bonuses and incentives in overtime pay calculations.
• Incorrect tax withholding – Withhold income taxes as if the employee earns that overtime amount every pay period throughout the year.
• Ignoring state-specific rules – Some states have overtime laws that go beyond FLSA requirements, so always check your state’s regulations.

The most effective way to prevent these mistakes is to review FLSA exemption rules, use payroll software to track hours and calculate taxes, and consult an employment attorney or CPA if you’re unsure.

How much is overtime pay in your state? States with additional overtime rules

Some states have additional rules that supersede the FLSA. Here's an overview:

• Alaska: Time and a half for more than 8 hours a day.
• California: Time and a half for more than 8 hours a day; double time for more than 12 hours a day, or for more than 8 hours on the 7th day of work in a row.
• Colorado: Time and a half for more than 12 hours in a day or more than 12 consecutive hours.
• Florida: Extra pay for manual laborers who work more than 10 hours a day, unless they have a written contract opting out.
• Nevada: Time and a half for more than 8 hours in a 24-hour period for employees who earn less than 1.5 times the minimum wage.
• Oregon: Time and a half for mill, factory, or manufacturing employees working over 10 hours in a day, and time and a half for timber-related workers after 8 hours in a day.

Stay compliant with Xero

The most effective way to stay on top of your small business payroll is with payroll software. Gusto, for example, lets you easily enter overtime pay, calculate state and federal taxes automatically, and even file payroll tax returns for you.

And sync your payroll software with accounting software like Xero – you'll never miss a beat.

FAQs on overtime pay rules

Asking the right questions can be critical if you want to stay compliant. Check out these FAQs:

Do I have to pay time and a half?

Yes, you must pay employees time and a half if they work more than 40 hours a week – unless they're exempt or subject to special rules, such as for police, fire, or healthcare workers. State law may require overtime pay in additional situations.

Does time and a half apply only to overtime work?

Time and a half applies both to overtime or other situations. Overtime is the situation where you must pay time and a half. But for holiday pay or an incentive, you can choose whether to pay time and a half for holiday pay.

Is overtime taxed?

Kind of. As of 2025, employees can claim a deduction of up to $12,500 against overtime pay (up to $25,000 if married and filing jointly). This deduction only applies to the extra pay – for example, if your regular rate is $20 and your overtime rate is $30, you can apply the deduction to the $10 extra you earn in overtime pay.

The tax deduction gradually reduces once your income exceeds $150,000 ($300,000 for married filing jointly). This rule only exempts the pay from income tax, not FICA taxes, and this provision is due to expire at the end of 2028.

What is the overtime poster?

Every employer covered by the FLSA must display a workplace poster that outlines federal minimum wage, overtime pay rules, and child labor regulations.

The poster also covers topics like tip credits, protections for nursing mothers, and FLSA enforcement. You can download the poster online in multiple languages from the Department of Labor website.

Is there a maximum number of hours an employee can work in a week?

No – federal law does not limit the number of hours employees over age 16 can work.

Does the FLSA have additional regulations for employee pay?

No, the FLSA does not have additional regulations related to employee pay. The FLSA outlines rules related to minimum wage, overtime pay, and the employment of minors. There are no federal requirements to provide vacation, holiday, or sick pay, or to provide meals, rest periods, or vacations.