Weighted Average Overtime |
  
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Weighted Average Overtime |
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If an entity is set to apply weighted average for overtime calculations, all time punches/entries for an employee during the workweek are evaluated using established overtime rules to determine what shifts should be included in the weighted average overtime calculation. For more information on evaluating what shifts should be included, see the wage group behavior setting for each applicable overtime rule: daily overtime rules, consecutive day overtime rules and weekly overtime rules.
Workforce considers each overtime rule in the following order: daily overtime rules, consecutive day overtime rules, then weekly overtime rules.
Let's assume that only a weekly overtime rule is to be applied and is set to consider any hours over 40, within a workweek as overtime. Also assume that the weekly overtime rule is set with a wage group behavior of 'include'. How does an employer determine the overtime rate of pay for an employee who works multiple jobs, in a single week at different hourly rates? If an employee works 35 hours as a Runner for $6.00 an hour, and 15 hours as a Hostess for $10.00 an hour, should the overtime rate be $6.00 x 1.5 = $9.00 an hour, or $10.00 x 1.5 = $15.00 an hour? The standard answer is: neither.
The Code of Federal Regulations states that when an employee works at two different hourly rates in the same week, the overtime pay should be determined by: 1) taking the weighted average pay rate for the entire week and multiplying that by 0.5 to produce the overtime premium and 2) adding the overtime premium to the regular rate . Using the above example, the weighted average pay rate for the week was $7.20 ($210 [35 hours @ $6.00] + $150 [15 hours @ $10.00 an hour] = $360; $360 divided by 50 hours = $7.20). The overtime premium equals $3.60 ($7.20 * 0.5). The employee’s overtime rates would be $9.60 ($6.00 + $3.60) for Runner and $13.60 ($10.00 + $3.60) for Hostess.
Based on this standard method of overtime calculation, the employee must be paid compensation for the workweek of $396.
Regardless of where the employee worked the OT, the total compensation remains the same - due to the weighted average use.
•Runner: 25 Reg @ $6.00 = $150.00 + Runner: 10 OT @ $9.60 = $96.00 + Hostess: 15 Reg @ $10.00 = $150.00 for a total of $396.00
•Runner: 35 Reg @ $6.00 = $210.00 + Hostess: 5 Reg @ $10.00 = $50.00 + Hostess: 10 OT @ $13.60 = $136.00 for a total of $396.00
•Runner: 30 Reg @ $6.00 = $180.00 + Runner: 5 OT @ $9.60 = $48.00 + Hostess: 10 Reg @ $10.00 = $100.00 + Hostess: 5 OT @ $13.60 = $68.00 for a total of $396.00
To leave regular hours unadjusted by overtime weighted average calculations, uncheck the 'Weighted Avg. OT' box in the Labor Definitions or Default Labor Definitions screen.
Download the Compeat Wage Calculator workbook to calculate an employee's wages. Accompanying instructions can be found here.
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