what is straight-time pay and how to calculate it

What is Straight-Time Pay and How to
Calculate it

Straight-time pay is the regular wage earned over a standard pay period and is calculated based on an employee's hourly wages. To calculate straight-time pay, multiply the hours worked by their hourly rate. Generally, straight-time pay does not include extra earnings such as overtime or PTO.

However, there's more to it than this simple formula. It's essential to know the nuances so you can adequately account for expected hours and how to set aside your budget for overtime.

What is the difference between overtime and straight-time?

First, it’s important to understand that pay is based on a "straight-time rate," usually understood as one eight-hour shift a day and 40 hours of work weekly.

Business leaders, accountants, and HR professionals must distinguish between overtime pay and straight-time pay. Straight-time pay is an employee's agreed-upon remuneration for working a set number of hours — the eight-hour shift, five days per week.

Therefore, any time worked past the daily eight hours or weekly 40 hours should be accrued as overtime and paid accordingly (usually at a time-and-a-half rate). Straight-time pay for overtime work can result in fines and potentially double the amount owing for unpaid overtime payments.

Fines and payments — these are definitely to be avoided. It makes properly calculating straight-time pay absolutely critical.

straight-time pay

Straight-time pay laws

The Fair Labor Standards Act regulates straight-time pay. Congress passed the FLSA in 1938 to establish a minimum wage, overtime pay, and record-keeping requirements. The legislation requires that all employees have a defined rate of pay.

The FLSA has established a standard workweek — the bank of "168 hours during 7 consecutive 24-hour periods." During that time, team members' straight-time pay would be 40 hours within that time frame.

Note that the FLSA does not distinguish between weekends and the "regular" work week.

This definition can protect workers, however. An employee cannot work 30 hours one week and 50 the next and have it paid at a regular rate of pay for 80 total hours over the course of the two weeks. In this case, it would be 30 hours of straight-time the first week and then 40 hours of straight time plus 10 hours of overtime the second week.

Anything over eight hours a workday or beyond a standard workweek generally requires time-and-a-half pay.

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Short rest periods, such as a coffee break, are included in straight-time pay. However, meal breaks, usually 30 minutes or more, are not included in straight-time pay. The government clarifies that workers cannot multitask and work while taking this meal break — they're either clocked out or getting paid.

There are some exemptions to overtime pay in the U.S. Still, federal law requires them to be salaried employees, paid at least $35,568 per year ($684 per week) based on 2020 rates, and perform an exempt job duty.

What are exempt jobs? They can include executives, administration, learned professional and creative employees, computer employees, outside sales, and highly-compensated employees (annual compensation of $107,432 or more).

Specific criteria need to be met in each of these exemptions. See the FLSA standards for their details about what counts.

How to calculate straight-time pay

Calculating straight-time pay is straightforward: take the number of hours worked in a pay period and multiply them by the straight-time hourly rate.

Formula for straight-time pay

If the assigned straight time hours worked is 40, the first 40 hours worked would be at the regular rate of pay. Anything after 40 hours would be considered overtime.

For example, if the employee's regular rate is $20 per hour and they work 50 hours in a workweek, they would be paid $20 per hour for the first 40 hours and then an overtime rate of $30 per hour (time and a half) for the final 10 hours.

Using Hubstaff to calculate and track straight-time pay

Hubstaff has many tools and apps that make it easy to calculate payroll. You can ensure employee timesheets are filled out correctly and that they are paid for all hours worked.

It all starts with employee scheduling: Hubstaff's intuitive apps help you create a schedule in minutes and then share it online with your employees. It's easy to stay organized, mitigate unnecessary overtime work, and eliminate gaps in the workforce for different projects.

Hubstaff's timesheet software makes paper time cards obsolete. The timesheets track how much time employees spend on projects, when they sign on for the day, and when they clock out.

You'll be able to budget resources properly with metrics and workforce analytics. For example: if employees are logging more overtime than expected, it could signify that you need more staff or a more extended project deadline. It will also help employers spot and eliminate off-the-clock work by their team.

Hubstaff timesheet features

Hubstaff also has employee monitoring software which helps you track the work levels of your employees. The software can see online activity, what apps team members are using (and for how long), and periodically take screenshots of your employees' screens.

In a remote work environment, this is huge in managing projects effectively.

For those traveling to different job sites, there is a GPS tracking app that will let project managers know how long deliveries take or the commuting time of employees. It is all designed to work together to help companies stay on budget and accurately record work.

Hubstaff's payroll app allows managers to manually adjust pay rates for each team member and contractor, whether they are on a fixed rate or hourly. You can send automated payments worldwide with integrations like PayPal, Wise, Gusto, or Bitwage.

Hubstaff workforce management software eliminates human error by calculating straight-time and overtime. Your bookkeeping will be much more effortless, and you'll cut administrative time and costs considerably.

Does straight-time pay apply to all employees?

Straight-time pay typically applies to non-exempt employees, meaning those eligible for overtime pay under labor laws such as the Fair Labor Standards Act (FLSA) in the United States. 

Exempt employees are generally not eligible for overtime pay and may receive a fixed salary regardless of the number of hours worked. 

However, it's essential to consult relevant labor laws and employment contracts to determine the specific rules and regulations that apply to different categories of employees in a given jurisdiction. 

The importance of getting straight-time pay right

As we emerge from the pandemic with remote and hybrid work environments, staying on top of straight-time work and overtime is becoming much more challenging.

These calculations create headaches not just for employers but also for employees. Some reports state that one in 10 employees put in 20 extra hours of free work a week in 2021. A workload like this can lead to burnout and high employee turnover. Further, violating FLSA is a significant legal issue that can cost a company millions.

Straight-time pay is a simple concept with significant ramifications and is essential to get right. So, avoid legal woes and confusing calculations with all-in-one HR and management software like Hubstaff.

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