Use Weighted Overtime to Ensure Regulatory Compliance
The federal Fair Labor Standards Act (FLSA) requires employers who have hourly employees that earn more than one standard wage to implement weighted overtime for when employees work more than 40 hours. Weighted overtime is an average of the different wages worked, considering how long the employee worked earning each wage.
For non-exempt salaried and hourly employees, weighted overtime encompasses different pay rates and shift differentials based on shift, cost center, department, job class, task, and time of day. The federally-mandated minimal overtime rate is 1.5 times the employee’s normal rate. For employees who earn only one wage, weighted overtime does not come into play.
But for those who earn more than one wage, you must average their time worked at each rate. This is weighted overtime. First, total the straight-time earnings at each wage, then divide that amount by the number of hours worked at that wage during the week. The resulting weighted average is the rate at which you must multiply by at least 1.5 times to determine the correct overtime pay for the workweek.
For example, an employee that works 30 hours at $10 per hour and 20 hours at $20 per hour would receive the following remuneration:
|Straight Time, 1st Wage:
Straight Time, 2nd Wage:
Total Straight Time:
Total Hours Worked:
Average Pay Rate:
Determine Overtime Rate:
Determine Overtime Pay:
Add Straight & OT Wages:
|30 hrs. x $10 = $300
20 hrs. x $20 = $400
$300 + $400 = $700
$700 / 50 = $14
$14 x 0.5 = $7
$7 x 20 = $140
$700 + $140 = $840 – Total Pay Due
As you can see, calculating weighted overtime manually can be very tedious and error-prone.
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