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What is Time and a Half, and When Does it Apply in Restaurants?

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Let's walk through time and a half and when it applies.

DISCLAIMER: This content is provided for informational purposes only and is not intended as legal, accounting, tax, HR, or other professional advice. You are responsible for your own compliance with laws and regulations. You should contact your attorney or other relevant advisor for advice specific to your circumstances.

Last updated on November 28, 2022.

When it comes to recruitment and employee retention, compensation continues to be a top contributor.

In a February 2022 poll by Gallup, income was the top consideration for job seekers with 64% of respondents saying “a significant increase in income or benefits” was “very important” when looking for a new job.

While work perks and incentive programs can boost employee morale and motivation, it would seem that nothing is quite as effective at recruiting and retaining employees as a healthy paycheck.

So, how do you keep your staff around (and happy to be there)? For one, consider their pay.

To help managers ensure they manage payroll effectively, and help employees secure appropriate compensation, let’s discuss a key cash consideration: time and a half payments.

Payroll & Team Management
Learn how a better payroll system can save you time and make your staff happy.

What is restaurant time and a half?

We all know the service industry typically does not conform to a standard “9-to-5” business model. 

Busy days, late nights, and around-the-clock scheduling operations mean it’s both common and easy for employees’ hours to stretch beyond a traditional 40-hour week.

According to the Fair Labor Standards Act (FLSA) — a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards — restaurants must pay hourly and nonexempt salary staff designated overtime premiums when they work more than 40 hours in a work week. Note that states and local jurisdictions may have their own laws regarding the same.

The minimum requirement is 1.5 times an employee’s regular pay rate — hence “time and a half.” 

In other words, a time and a half payment means employees are compensated for one hour of work as though they worked for an hour and a half.

This term is often used interchangeably with overtime, but it’s worth pointing out that overtime policies can, and do, vary between employers.

There are a number of situations when a restaurant manager might consider paying, or be mandated to pay, hourly employees at time and a half. For example:

  • as compensation for overtime work/hours;
  • as an incentive to come into work on certain days of the week (Sunday is often a primary candidate for time-and-a-half pay or other form of overtime pay); and/or
  • to comply with government mandates for things like holidays.
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Why does time and a half matter to restaurants?

The restaurant industry is known for having some of the slimmest profit margins around. An average profit margin for a restaurant depends on the type of operation but usually falls between 3 – 5 percent.

To keep a restaurant running smoothly and profitably, managers should watch their margins closely, keeping an eye out for opportunities to either reduce costs or improve returns. Both are sound ways to potentially give your profit margin a boost.

Labor costs — which include salaries and wages — can account for a large chunk of a restaurant’s operational costs. According to guidelines from White-Hutchinson Leisure and Learning consulting group, restaurant labor costs should come in at less than 30% of revenue, and food and labor costs should be less than 60% of the revenue, though it depends on the type of restaurant you run.

If managers aren’t keeping up-to-date with the hours their employees are working, they might land themselves in a sticky — and expensive — overtime situation. 

Further, if hours aren’t paid out at the appropriate rate, your restaurant could be penalized for non-compliance with state and/or federal requirements. 

As you can imagine, neither situation is great for a restaurant’s reputation or bottom line. So, it’s important to get hourly wage payments, including overtime wages, correct.

How to manage restaurant time and a half

To manage and, where possible, minimize time and a half payments, consider a top-to-bottom audit of your workforce to determine the cost of your current scheduling practices.

Ask yourself:

  • Do you have enough staff to meet operational needs?
  • Are work hours being distributed evenly?
  • Might overtime spikes be linked to issues related to workplace culture (low employee morale, inadequate training, etc.)? 
  • Are you clearly communicating company policies regarding overtime?
  • Are certain employees chomping at the bit for extra shifts? 
    • If yes, are those extra shifts tipping them over the 40-hour mark?

Many of these answers are available through back-end analytics from integrated labor tools. For example, restaurant employee scheduling software, such as Sling by Toast, will provide your restaurant’s labor percentage so you know how best to schedule your team. Some software might include features like overtime alerts will notify you when an employee is approaching time and a half eligibility, helping management stay on top of who is working when (and at what cost). 

Another way to manage time and a half payments is to invest in restaurant technologies and software, like online ordering, self-ordering kiosks, and smart restaurant POS systems. These investments can help to free up staff time, allowing them to power through orders and tasks with greater efficiency. Consider choosing software with sophisticated back-end analytics, as these should help you make better business data-based decisions.

Why does time and a half matter to restaurant employees?

This is especially relevant for wage workers, otherwise known as hourly workers or non-exempt employees, since your time quite literally translates to money.

Familiarizing yourself with your rights and entitlements is an essential practice to protect yourself from both exploitative errors and honest mistakes. Some restaurants will cover compensation as part of their employee onboarding process. If yours does not, take time to click through local and federal employment regulations from the U.S. Department of Labor, or chat with your management team to ensure you have the information you need to get the pay you’re owed for your hard work. 

How to calculate and track time and a half

Before you can calculate your time and a half pay, you must first identify your regular rate of pay.

Hourly wage employees (or non-exempt employees) will find their standard hourly pay rate on their pay stub. If, for example, you earn an hourly rate of $15 per hour, your time and a half rate — applicable to anything over 40 hours — would jump to $22.50 per hour.

If math isn’t your thing, there are countless overtime pay rate calculators out there to lend a helping hand.

Time to get back to the workday

We hope this overview of time and a half makes dollars and sense — pun intended. As always, if you are ever concerned about a human resources topic such as gross pay or benefits, please reach out to a legal, accounting, tax, HR, or other professional for advice. This content is provided for informational purposes only and you are responsible for your own compliance with laws and regulations.

Payroll & Team Management
Learn how a better payroll system can save you time and make your staff happy.