Glossary of Human Resources Management and Employee Benefit Terms
Straight-time pay is the total amount of money an employee earns in any given period, usually one or two weeks. Usually, straight-time pay does not include overtime pay or paid time off. In other words, straight-time pay is the regular wage an employee receives for working a regular amount of hours.
To calculate straight-time pay, multiply the number of hours the employee usually works by their hourly pay rate. If an employee makes $15 an hour and is usually scheduled for 30 hours a week, that employee’s straight-time pay for the week is $450 (before taxes and other deductions, of course).
To calculate the straight-time pay of a salaried employee, you must work backward. Salaried employees tend to have their pay set for the entire year. If our hourly employee from the previous paragraph was upgraded to a full-time, salaried position, their annual salary would be $31,200. We can easily find their weekly pay by dividing their salary by 52 (the number of weeks in a year), which comes to $600.
Straight-time pay is regulated by the Fair Labor Standards Act (FLSA). Passed in 1938, the FLSA established minimum wage, overtime pay, and general record keeping requirements, like time tracking, for private and public companies.
The FLSA states that all employees must have a defined regular rate of pay. Their regular rate of pay will help calculate what an employee’s overtime pay rate will be.
The FLSA also established 40 hours as the standard workweek; any time an employee spends working above that threshold is eligible for overtime compensation unless they are exempt employees.
Straight-time pay is used to calculate the pay for an employee that works under, or equal to, 40 hours in a week. Any hours worked that exceed 40 hours during a week are subject to overtime pay laws. Overtime pay is calculated by multiplying an employee’s regular wage by 1.5. If an employee makes $15 an hour, they will be paid $22.50 ($15 multiplied by 1.5) for every hour of overtime they work. This multiplier is why overtime pay is sometimes referred to as time and a half.
If your employees work for an hourly wage, you must use overtime pay to calculate their earnings for each hour they work over 40 in a single week. Paying employees their straight-time pay for overtime hours is in violation of the FLSA and therefore illegal.
However, if your employee is salaried and exempt from overtime benefits, you can compensate them with straight-time pay even if they go over 40 hours in a week. An employee can only be exempt if they:
Are paid at least $35,568 per year or $684 per week (based on 2020 rates; you may need to look up the figures for your current tax year)
Are paid on a salary basis
Perform exempt job duties, which include tasks that require advanced knowledge
While overtime pay may not apply to all employees, straight-time pay does. Straight-time pay is the default payment option for employees and mandates the regular pay they should receive for their labor.