Overtime Pay
Overtime pay, as described by the FLSA (Fair Labor Standards Act) is awarded to non-exempt employees who qualify for overtime pay. Overtime pay for non-exempt employees is calculated at one-and-a-half times (1.5x) their hourly rate, for every work hour beyond the standard 40-hour week.
Once you have determined overtime eligibility, calculating overtime pay is simple.
Blended Rates
The federal government’s Fair Labor Standards Act requires that when work is performed at two or more rates, overtime must be paid out at a blended rate. A “blended rate” is a rate of not less than one-and-a-half times the weighted average of all non-overtime rates used during that workweek.
When is a Blended Rate Required?
For most employers, calculating overtime is straightforward: employees receive one-and-a-half times their regular rate of pay for all hours worked over 40 hours. However, this becomes more complicated for employers that have employees that work different jobs at different rates. You may have employees that perform different jobs or tasks at different rates.
Weighted vs Blended Overtime - Are They the Same?
Yes, blended overtime is often referred to as weighted or weighted average. It gets its name because a weighted average of two different pay rates is used to determine the overtime rate.
How to Calculate a Blended (Weighted Average) Overtime Rates
You can follow the steps in the example below to calculate overtime with two different pay rates:
Let’s say David is an hourly employee who worked a total of 50 hours in a workweek at two different jobs having different hourly rate as shown in the grid below.
|
Job |
Rate/Hr. |
Regular Hours |
Overtime Hours |
DOT Hours |
Total |
|
Driver |
$10 |
25 |
5 |
0 |
30 |
|
Cleaner |
$20 |
15 |
5 |
0 |
20 |
David works total 30 hours for Driver job out of which 25 hours are regular and 5 hours are overtime at a rate of $10 per hour. As a Cleaner, he works a total of 20 hours, out of which 15 hours are regular and 5 hours are overtime at a rate of $20 per hour.
First, the employee’s weighted average is determined. Once it is available, then each respective job’s overtime hours are paid at a weighted overtime rate. Example:
Step 1: Calculate the straight wage by multiplying the total hours worked for each job with each job’s respective hourly rate:
(30 hrs. x $10) + (20 hrs. x $20) = $700
Step 2: Divide the total straight wage calculated in Step 1 by total work (Regular + OT + DOT) hours to find blended rate.
$700/50 hrs. =$14/hr
Step 3: To get the weighted overtime rate for one job, divide the average weighted blended rate form Step 2 by 2 and add it to the individual job rate.
$14/2 =$7/hr
Step 4: We got 0.5 (half) the blended rate in Step 3. Now, add this 0.5x blended rate into each jobs regular rate to get blended overtime rates for each job.
Driver Job rates are:
- Regular Rate: $10/hr
- Blended Overtime Rate: $17/hr ($10+$7)
- Blended Double Overtime Rate: $24/hr ($10 + $14)
Cleaner Job rates are:
- Blended Regular: $20/hr
- Blended Overtime: $27/hr ($30+$7)
- Blended Double Overtime: $34/hr ($20 + $14)
Employee’s total wages for multi-job rate scenarios will be (OT = Overtime, DOT = Double Overtime):
(Driver Reg Hours x Reg Rate) + (Driver OT Hours x Blended OT Rate) + (Driver DOT Hours x Blended DOT Rate)
+
(Cleaner Reg Hours x Reg Rate) + (Cleaner OT Hours x Blended OT Rate) + (Cleaner DOT Hours x Blended DOT Rate)
(25 hrs. x $10) + (5 hrs. x $17) + (0 hrs. x $24)
+
(15 hrs. x $20) + (5 hrs. x $27) + (0 hrs. x $34)
=$770