How do I calculate overtime when the employee works at two (or more) different rates of pay?
Employers are widely familiar with the requirement that non-exempt employees are entitled to overtime pay (overtime being what they are "not exempt" from receiving) at a rate of 1.5x their regular rate of pay. What is often lost though is that this multiplier is against the "regular rate" of pay, not just the employee's hourly rate. What is the regular rate of pay? It is many forms of compensation going beyond just wages, but for purposes of determining the regular rate of pay in the context of an employee working multiple rates for the same employer we need to calculate the weighted average of the rates to determine what the regular rate is.
Take Charlie as an example. Charlie works for LMN, Inc. performing two jobs - his day job as a file clerk and his night job cleaning up the office after hours (janitorial). For his file clerk job, Charlie is paid $15/hour; as a janitor he's paid $10/hour. He works 40 hours as a file clerk during the workweek and then another 10 as a janitor. There are different methods to do the algebra on this to determine the regular rate of pay, but one would be: $15 x 40 = $600 - file clerk; $10 x 10 = $100 - janitor. Total compensation is $700. $700/50 hours worked = $14/hour regular rate of pay. This does not calculate the overtime premium for Charlie though. To calculate that we add the premium as such: $14/hour (regular rate of pay) x .5 (OT multiplier) x 10 (number of OT hours worked) = $70. $700 (regular pay) + $70 (OT premium) = $770.
Thompson Coe’s Tips of the Week are not intended as a solicitation, do not constitute legal advice and do not establish an attorney-client relationship.