If you have nonexempt employees who work more than 40 hours in a single workweek performing two or more different jobs with different pay rates, you need to make sure that you are paying them properly. The Fair Labor Standards Act (FLSA) allows two different approaches to computing the rate for which overtime is paid:

1) The weighted average, which is the default approach outlined in 29 C.F.R. 778.115; or

2) The established rate associated with the job that caused the overtime to occur, which is explained in 29 C.F.R. 778.419

Weighted Average

Under 29 C.F.R. 778.115, the weighted average rate is an employee’s total earnings computed to include his compensation during the workweek from all rates divided by the total number of hours worked at all jobs.

For example, Jesse works 45 hours at $16/ hour as a Facility Assistant. During the same workweek, he also works 15 hours at $8/hour as a server, resulting in 60 total hours worked at both jobs during the workweek. According to their payroll policy, non-exempt employees will be paid overtime compensation at the rate of 1.5 times their regular hourly rate for hours worked in excess of 40 hours in one week. Jesse’s weighted average rate would be calculated as follows:

• Total earnings for Facility Assistant: 45 hours * $16/hour = $720
• Total earnings for Server: 15 hours * $8/hour = $120
• Total earnings for the two jobs: $720 + $120 = $840
• Total working hours: 45 + 15 = 60 hours
• Weighted Average Regular Rate of Pay: $840 / 60 hours = $14/hour

With the weighted average rate, Jesse’s total wages for the week would be calculated as:

• Regular wage: 40 hours * $14/hour = $560
• Overtime wage: 20 hours * $14/hour * 1.5 = $420
• Total wages: $560 + $420 = $980

Established Rate

Under 29 C.F.R. 778.419, an employee who performs two or more different kinds of work, for which different straight time hourly rates are established, may agree with his employer in advance of the performance of the work that he will be paid during overtime hours at a rate not less than one and one-half times the hourly non-overtime rate established for the type of work he is performing during such overtime hours.

The employer and employee must agree to this approach prior to the start of the work and it is critical to be able to pinpoint exactly when the employee passes the 40-hour mark for the workweek.

In the same basic example as above, Jesse works 45 hours at $16/hour as a Facility Assistant. During the same workweek, he also works 15 hours at $8/hour as a server, resulting in 60 total hours worked at both jobs during the workweek. The Facility Assistant work was done Monday through Friday for 8 hours per day and 5 hours on Saturday. The Server work was done Monday through Friday, 3 hours each evening. The company observes a Monday through Sunday work week. Non-exempt employees will be paid overtime compensation at the rate of 1.5 times their regular hourly rate for hours worked in excess of 40 hours in one week. Jesse’s total wages for the week would be calculated as follows:

• Work hours before the 40-hour point reached (40 regular hours):
  • Facility Assistant hours: 8 hours * 3 days (Mon. – Wed.) + 7 hours (Thurs.) = 31 hours
  • Server: 3 hours * 3 days (Mon. – Wed.) = 9 hours
• Wages for regular hours:
  • Facility Assistant: 31 hours * $16/hour = $496
  • Server 9 hours * $8/hour = $72
• Work hours after the 40-hour point reached (20 overtime hours)
  • Facility Assistant: 1 hour (Thur.) + 8 hours (Fri.) + 5 hours (Sat.) = 14 hours
  • Server: 3 hours (Thurs.) + 3 hours ( Fri.) = 6 hours
• Wages for overtime hours
  • Facility Assistant: 14 hours * $16/hour * 1.5 = $336
  • Server: 6 hours * $8/hour * 1.5 = $72
• Total wages: $496 + $72 + $336 + $72 = $976

Regardless of the approach used, it is critical that an organization properly calculate overtime pay as non-compliance with employment laws can result in substantial Department of Labor penalties.

---

Posts You Might Also Like: