As discussed in the prior three blogs, the Fair Labor Standards Act regulates when and how overtime must be paid. Wages may be determined on a piece-rate, salary, commission, or some other basis, but in all such cases, the overtime pay due must be computed on the basis of the average hourly rate derived from such earnings. This is calculated by dividing the total pay for employment in any workweek (except exclusions) by the total number of hours actually worked.
Payments which are not part of the regular rate include pay for expenses incurred on the employer’s behalf, premium payments for overtime work or the true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, gifts and payments in the nature of gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holidays, or illness.
If your employee is only ever paid one rate hourly, calculating overtime is easy. It’s basically the normal rate earned during that time period times 1.5. Where an employee in a single workweek works at two or more different types of work for which different straight-time rates have been established, the regular rate for that week is the weighted average of such rates. That is, the earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs.
So what does this mean? If your employee worked 30 hours at a job paying $10 per hour and 15 hours at a job that pays $12 per hour, the overtime isn’t 5 times $12 times 1.5 to determine the overtime pay. Instead you’d take the 30 x $10 plus 15 times $12 to get $480. This is divided by total hours worked (45) to get a regular rate of $10.66. Overtime is then paid at $16 per hour ($10.66 x 1.5).
This can be extremely confusing when trying to calculate. If you would like to read more on the overtime regulations and how to calculate, see http://www.dol.gov/whd/regs/compliance/whdfs23.pdf.