Straight-time refers to the regular hours an employee works at their standard hourly wage, not including overtime, bonuses, holidays, or paid time off. “Straight-time pay” is simply the total compensation for those standard hours.
Although it’s often associated with the first 40 hours worked in a week, this number can differ depending on state-specific labor laws or internal company policy. For instance, California law requires overtime to begin after 8 hours worked in a single day, not just after 40 hours in a week.
Is Paying Straight-Time Legal?
Yes, it is completely legal to compensate employees using straight-time pay. In fact, it’s the most common way to pay non-exempt employees for their regular work hours. However, paying straight-time for hours that legally count as overtime is not permitted under the Fair Labor Standards Act (FLSA). For example, if a construction worker puts in more than 40 hours and is only paid at their base rate, that could result in a wage claim.
How to Calculate Straight-Time Pay
To calculate straight-time wages:
- Exclude any hours that fall under overtime, PTO, or holiday pay.
- Multiply the number of regular hours worked by the employee’s hourly rate.
Example:
If Dana earns $22/hour and works 40 standard hours, her straight-time earnings for the week are:40 hours × $22 = $880
If the following week she takes a day off using 8 hours of PTO and works 32 hours, her straight-time pay would be:32 hours × $22 = $704
(plus the 8 hours of PTO, paid separately).
Advantages of Straight-Time Pay
Using straight-time pay helps:
- Keep payroll processes clear and compliant.
- Ensure fairness and consistency in employee compensation.
- Provide workers with reliable income expectations.
However, it doesn’t account for performance-based incentives or extra effort, which could impact employee motivation over time.
Straight-Time vs. Overtime Pay
Straight-time covers your employees’ regular hours. Overtime applies when an employee exceeds a specific threshold, typically 40 hours per week, and it must be paid at 1.5 times the regular rate.
Example:
Let’s say Sam earns $25/hour and works 45 hours one week. His pay would be:
- Straight-time:
40 × $25 = $1,000 - Overtime:
5 × $37.50 = $187.50 - Total Pay = $1,187.50
Does Overtime Pay Get Taxed More Than Straight-Time?
No, all earnings, whether straight-time or overtime, are taxed the same. The higher rate just increases total taxable income, which might move an employee into a higher tax bracket, but the tax rate on overtime itself does not change.
What Happens When an Employee Has Multiple Pay Rates?
If an employee works different roles with varying pay rates during a pay period, straight-time calculations require using a weighted average.
Example with Multiple Rates:
Suppose Alex works:
- 30 hours at $18/hour (Role A)
- 10 hours at $12/hour (Role B)
You’d calculate the average rate as follows:(30×$18 + 10×$12) = $540 + $120 = $660
Divide by 40 total hours:$660 ÷ 40 = $16.50/hour (weighted average pay rate)
If Alex then works 10 additional hours (total 50 hours), those hours would be paid at:10 × ($16.50 × 1.5) = $247.50 in overtime pay
Some states may require that overtime be based on the highest rate worked during the pay period, so always check local laws.
The Role of Straight-Time in Overtime Calculations
Under the FLSA, employers must use an employee’s regular rate of pay, often determined by their straight-time rate, to calculate overtime wages.
Using the earlier example, if Sam earns $20/hour and works 50 hours, he should receive:
- $800 for 40 straight-time hours
- $300 for 10 overtime hours at $30/hour
- Total: $1,100
Legal and Compliance Considerations
Straight-time must never be used to pay overtime hours. Doing so violates federal law and could result in investigations by the Department of Labor’s Wage and Hour Division.
Employers must stay updated on both federal and state overtime rules, particularly if they operate across multiple jurisdictions. Some states include commission, piece-rate, or bonus earnings in the overtime rate, making compliance more complex.
Beyond recommends employers use reliable payroll platforms to stay compliant and ensure accurate straight-time and overtime calculations.