Calculating Overtime with 2 Different Pay Rates

napel

I need help! We have employees who will be working two different jobs at two different pay rates during the same work week. They will most likely receive overtime. How do we figure it? Average the rates? Pay whatever the rate is for the hours worked that pushed them over 40? Pay overtime at the higher rate only?

Still Need Coffee

I've always used an average rate - divide total comp received throughout the workweek by the total number of hours worked.

For example, if someone works 30 hours at $10 per hour and 15 hours at $15 per hour, total comp is $300 + $225 = $525. The "average" rate would be $525/45 = $11.67, so OT rate would be $17.50.

Actual pay would then be (30x$10) + (10x$15) + (5x$17.50) = $537.50

The issue with this method, however, is that it can seem to shortchange an employee depending on how you do the calculations. I could have changed the calculation to (15x$15) + (25x$10) + (5x$17.50) and got $562.50 in gross. The employer must decide which rate takes "priority," which is easiest if the second rate is for a secondary, more voluntary job. Did I confuse you yet??:o

There are other options out there, such as reaching an agreement with the employee as to what rate will be used for OT calculations, but you are better off consulting with a labor attorney before going down that road.

Good luck!

napel

Thank you! I am a little confused...but I will study your answer and figure it all out. Thanks!