Calculating Overtime At Multiple Rates

Kayla Moreland , May 14, 2015

The FLSA requires that employees receive overtime pay at a rate not less than one and one half times their regular rate of pay for all hours worked in excess of 40 in a workweek.  But what happens, for instance, when an employee is paid at two or more different rates of pay in a single week?  Determining the proper overtime calculation under this scenario can be tricky.  For employees perform work at different rates, the FLSA requires overtime to be calculated according to a “blended rate,” or a rate not less than one and one half times the weighted average of all the different rates used during that workweek.  In other words, overtime is calculated by adding up employee’s weekly earnings for all of the rates and then dividing that number by the total hours worked in that week for both jobs.  Because the overtime rate will increase or decrease depending upon the total weekly hours worked, employers must make this calculation each week for employees that work at multiple rates.

Here’s an example.  The overtime calculation for an employee working as a nurses’ aide 40 hours a week at $11 an hour, and also working 16 hours on weekends as a receptionist at $8 an hour, looks like this:

Step 1 (determine straight time compensation): 40 x $11 + 16 x $8 = $568

Step 2 (determine regular rate): $568 ÷ 56 = $10.14

Step 3 (determine overtime rate): $10.14 x 1.5 = $15.21

Step 4 (determine straight time earnings): $10.14 x 40 = $405.60

Step 5 (determine overtime earnings): $15.21 x 16 = $243.36

TOTAL $648.96

The FLSA provides one exception to this general rule.  Instead using the blended rate as shown above, employers can use a different overtime computation provided that an agreement or understanding is made with the employee before the work is performed.  Employers can only take advantage of this exception, however, if (1) the employee performs two or more different kinds of work at different straight time hourly rates, and (2) the determined overtime rate is not less than one and one half times the bona fide rates that apply to the same work when performed during non-overtime hours.  See 29 C.F.R. § 778.419.  Employers should make sure to keep precise records that break down the specific hours each employee worked at the different rates.  This exception cannot be applied to an employee who is paid different hourly rates for the same type of work.

Source: Robert G. Brody & Abby M. Warren, Overtime Calculation for Employees Working at Multiple Rates (May 2, 2014), http://www.law.com/sites/robertgbrody/2014/05/02/overtime-calculation-for-employees-working-at-multiple-rates/; Department of Labor Wage and Hour Division, Fact Sheet #54, http://www.dol.gov/whd/regs/compliance/whdfs54.htm.
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