Is your business thinking about offering double-time pay as a benefit for your employees? Does your business already offer double-time pay but needs to administer it better?
We’re here to help.
In this article, we discuss some of the important details that go into incorporating double-time pay into your standard operating procedures — including how to calculate it.
Table Of Contents
What Is Double-Time Pay?
Double-time pay (or DT for short) is a rate of compensation that is twice the regular rate that an employee receives for normal hours worked.
If, for example, you pay Phineas $15 per hour, his double-time rate would be $30 per hour ($15 x 2) for any hours over a certain amount.
Your business might choose to offer this voluntary benefit — or be required to offer it by state law — if an employee works above a certain amount of hours, during days they would normally be off, or in extreme or unusual situations.
We’ll discuss these hours, days, and situations later on in this article.
First, though, we’ll clarify one of the biggest questions on the subject: What is double-time pay versus overtime pay?
Double-Time Pay Vs. Overtime Pay
As mentioned earlier, double-time pay is a rate of compensation that is twice the regular rate that an employee receives for normal hours worked.
This is in contrast to overtime pay which is a rate of compensation that is 1.5 times the regular rate that an employee receives for any amount of time above 40 hours that they work in a seven-day period.
So, if Phineas works 30 hours in one week, but you ask him to come in for three hours on Sunday (during which you’ll pay him double time), his check would include:
- 30 hours at his regular pay rate ($15/hour)
- Three hours at his DT rate ($30/hour)
If, on the other hand, Phineas works 45 hours in a single workweek and is eligible for overtime, his check would include:
- 40 hours at his regular pay rate ($15/hour)
- Five hours at 1.5 times his regular pay rate ($15 x 1.5 = $22.50/hour)
How do you know when to apply double-time pay versus overtime pay? We’ll discuss that in the next section.
Double-Time Pay And The FLSA
The Fair Labor Standards Act
According to the Fair Labor Standards Act (FLSA), nonexempt employees (typically, those that are paid by the hour) must receive overtime pay of at least 1.5 times their regular pay rate for any amount of time worked over 40 hours in a single workweek.
That means that the vast majority of businesses in the United States are required by law to pay their nonexempt employees overtime if the situation arises. If the business doesn’t pay overtime, it may face fines and legal action until it does.
In addition, the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days.
This is important to consider because some businesses offer double time if an employee is willing to work these unusual days.
Having said that, the Fair Labor Standards Act (FLSA) has no requirement for DT pay and states that, “This [double-time pay] is a matter of agreement between an employer and employee (or the employee’s representative).”
Bottom line: The federal government does not require that businesses pay double time as they do overtime.
Some states, however, do have regulations on the books that make double time mandatory in certain situations.
California law, for example, states that:
Employment beyond eight hours in any workday, or more than six days in any workweek, requires the employee to be compensated for the overtime at not less than:
- One and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek; and
- Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.
So, even though federal law doesn’t require double time, state law might.
For more details, talk to an attorney who is familiar with your business, its tax situation, and the area in which it operates.
Unless your business is located in a state that mandates double-time pay for certain hours, days, or situations, it’s entirely up to the business whether to offer this type of compensation or not.
Some businesses will pay double time to employees if those team members agree to work:
- Holidays (e.g., Christmas, Thanksgiving, Labor Day, etc.)
- Irregular or less desirable shifts (e.g., two shifts in a row or the night shift)
- Any overtime hours worked after a certain amount (this is at the discretion of the business itself as long as it pays overtime as well)
Think of double time as a fringe benefit you can use to attract, motivate, and retain the best employees for your business.
How To Calculate Double-Time Pay
1) Establish When Double-Time Pay Kicks In
For this example, let’s say that your business decides to pay double time for any hours worked on Christmas Day.
Phineas works a total of 38 hours that workweek, eight of which fall on Christmas Day.
2) Figure Out Regular Rate Pay
The first part of the calculation is to figure out Phineas’ pay for the first 30 hours (those that don’t fall into the double-time category).
If Phineas’ regular pay rate is $15 per hour, his regular pay would be:
Regular Pay = Regular Pay Rate x Regular Hours
Regular Pay = $15/hour x 30
Regular Pay = $450
With that information in mind, you can then move on to calculate the double time.
3) Figure Out Double-Time Pay
The other eight hours that Phineas worked that week fell on Christmas Day. As per your agreement, you would have to compensate him at twice his regular pay rate.
Here’s the formula for that calculation:
DT Pay = (Regular Pay Rate x 2) x Any Time That Exceeds Regular Hours
DT Pay = ($15 x 2) x 8
DT Pay = $30 x 8
DT Pay = $240
After finding that dollar amount, you’re ready to calculate the employee’s total pay for the workweek.
4) Add The Two Together For Total Pay
Now that you’ve figured out both the regular pay and the double-time pay, you can add them together to calculate Phineas’ total paycheck for the workweek.
Total Pay = Regular Pay + DT Pay
Total Pay = $450 + $240
Total Pay = $690
You can see how double time can quickly cause your labor budget to balloon out of control.
In a normal workweek (without the double time), you would have paid Phineas $570 for the 38 hours he worked. With the double time in place, you would have to pay him an extra $120.
That may not seem like a lot at first, but multiply it by the total number of employees you have, or the total number that work on a special day, and you can see how the costs can really start to add up.
Keep Work Hours In Check With Inch
One of the biggest concerns with offering double-time pay is keeping those work hours in check. Too many hours at twice the usual rate can send your labor costs into the stratosphere and seriously affect your bottom line for the worse.
The best way to monitor and regulate DT pay — and all overtime, for that matter — is with employee management software, such as Inch.
Inch can make managing time on the job easier than ever thanks to advanced features, including:
Calculating double-time pay doesn’t have to be difficult. With the formulas outlined in this article and the help of Inch’s workforce management software, you can control the work hours of your team and learn to run payroll like a pro.
For more free resources to help you manage your business better, organize and schedule your team, and track and calculate labor costs, visit TryInch.com today.