In general, overtime is defined by any time an employee works beyond a standard 40-hour work week. According to the Fair Labor and Standards Act (FLSA), employees working over 40 hours should be paid at 1.5 times their regular wage.
In most instances this is pretty straightforward. However, for some employees, the employer may need to use a blended or weighted average rate to accurately pay the employee.
What are 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. However, this becomes more complicated for employers that have employees that work different jobs at different rates. You may have employees that perform different duties or tasks at different rates. Confused? Understandable – so let’s dig deeper.
Is Weighted Overtime the Same as Blended Overtime?
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.
Blended Overtime Rate Calculator Formula
You can follow these steps for calculating overtime with two different pay rates:
1. Determine the employee’s base pay.
a. Multiply the amount of hours worked in both roles by hourly rates.
Determine the sum of the total wages from these positions to figure out the total amount compensated.
2. Calculate the weighted average pay rate
a. Divide the base bay by the total hours worked.
3. Determine the weighted overtime total
a. Multiply the weighted average pay rate by 0.5 to calculate the blended overtime pay rate.
b. Multiply the overtime rate by the total overtime hours, which will give you the total bonus overtime pay.
4. Calculate the total earnings
a. Find the sum of the weighted overtime total and the employee’s base pay.
Blended Overtime Rate Calculation Example
You own a building service contracting company and your employee(s) perform a variety of duties at the following rates:
Your employee acts as a supervisor at $20 per hour, washes floors at $15 per hour, and empties trash at $10 per hour. When an employee works over 40 hours in a week, how do you calculate their overtime rate?
Let’s assume the employee supervised for 20 hours, washed floors for 20 hours, and emptied trash for 10 hours in a workweek. The blended rate would be determined by the following overtime rate calculation formula:
20 hours X $20 + 20 hours X $15 +10 hours X $10 = $800; $800/50 total hours = $16 per hour
Therefore, $16 per hour is the blended rate. The premium pay for overtime is then half of $16, $8, multiplied by the 10 overtime hours for a total of $80. Total compensation would be $880 for this week.
Using the blended rate, the overtime rate may change as the total hours worked in a week change. For instance, if the employee worked 5 hours supervising, 25 hours washing floors, and 20 hours emptying trash, the blended rate per hour would be $13.50.
Employers must calculate this every single week for each employee who performs work at different rates. All rates must be over minimum wage and the regular rate must include any other compensation, such as bonuses, cost-of-living adjustments, and the like.
Blended Overtime Rate Calculators
For employers who must consistently use blended overtime to adequately calculate overtime, a blended overtime calculator may be the best solution to ensure overtime pay compliance. A blended overtime rate calculator takes into account the weighted overtime rate and uses a multiplier coefficient of 0.5 to calculate the blended overtime pay rate.
While these calculations can be done manually, errors are common and can result in inaccurate pay and lead to compliance issues.
Benefits from an Accurate Blended Overtime Rate Calculator with EPAY Time & Labor
EPAY’s time and attendance solution has the ability to calculate blended rates for your employees that work overtime and have worked at different pay rates during the pay period. Specifically, EPAY’s time and attendance solution will allow you to:
1. Specify the group of employees that will be paid based on blended rate.
2. Specify which rate types would participate in the blended rate calculation.
3. Process the blended rate, based on hours worked and applicable regular pay, and use that to decide the final pay of the employee.
4. Display blended rates on the screen and in printed reports and exports.
FAQs about Overtime Pay Rates
1. How do you Figure Out Overtime Pay?
Overtime pay, as described by the FLSA 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 their hourly rate, for every work hour beyond the standard 40-hour week.
Once you’ve determined overtime eligibility, calculating overtime pay is a simple process:
2. How to use a Blended Overtime Rate Calculator to Calculate Overtime Rate
To use a traditional overtime calculator, you’ll need to have the following information handy:
1. Regular hourly pay rate
2. Standard work week (40 hours)
3. Overtime hours per pay period
3. How do you Calculate Time and a Half?
In most cases, this calculation will be fairly simple. Any amount of hours worked beyond 40 hours during week is then taken and multiplied by 1.5. However, this simple overtime calculation does not work if the employee performs different jobs that pay different rates. A construction employee, for example, may get different pay rates for operating different machinery or working on different projects. While they are still paid hourly, the pay changes based on the job performed.
In scenarios like this, blended rates are needed to properly calculate overtime pay.
Overtime Blended Rate Calculation Made Simple
Using EPAY’s time and attendance system, you’ll be able to conduct blended rate calculations easily. Our software also makes it easy to manage other aspects of your business, giving you everything you need for effective workforce and labor management. With a complete human capital management solution, payroll software and workforce management software from EPAY, you can have even more control over every aspect of your business. Get a personalized demonstration of EPAY’s full human capital management suite to see all the ways EPAY can help you.