How Is Overtime Calculated When an Employee Works at Two Pay Rates in One Week?

How is overtime calculated when an employee works at two pay rates in one week?

Overtime is paid at one and a half times the employee’s regular rate for the week. Under the Fair Labor Standards Act, when an employee earns two or more hourly rates in the same week, the regular rate is the weighted average of those rates. To find it, add up the straight-time pay for all hours worked that week and divide by the total hours. Each hour over 40 then earns a premium of half the regular rate, on top of the straight-time pay for that hour. Dapt makes this calculation before the hours reach payroll and puts the premium on the job that ran the overtime, for every employee, every week.

A worked example

Maria works 24 hours at Facility A at $22 an hour and 20 hours at Facility B at $25 an hour, 44 hours in the week.

Three steps turn that table into Maria’s pay for the week.

The four overtime hours were already paid at straight time inside the $1,028.00. The premium is the extra half, which is what makes those hours time and a half. Maria is paid $1,074.73 for the week.

Paying the overtime at the rate of the last shift, or at the higher of the two rates, gives a different number. The weighted average is the default rule, set out in 29 CFR 778.115. One alternative exists: with an agreement made in advance, the employer may pay the overtime hours at the rate in effect for the work being done during those hours (29 CFR 778.419). Either way, the rule has to be applied the same way every week.

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Where do two rates come from in one week?

• Different jobs or clients. A staffing agency pays one rate at one facility and another somewhere else. A contractor pays a different rate for a different task or job.
• Prevailing wage and private work. The same carpenter is paid the contract’s rate on Monday’s public job and the company rate on Tuesday’s private one. Prevailing wage vs. union covers a third case, union scale.
• Two classifications in a day. A worker who is a laborer in the morning and a carpenter in the afternoon earns two rates that day.
• Shift differentials. An evening or weekend premium is a second rate for the hours it covers.

Why does it matter for job costing?

The overtime premium is real labor cost, and the blended rate used in the estimate does not carry it. When the premium is spread across the week or left in overhead, the job that ran the overtime looks cheaper than it was. Dapt computes the regular rate from every rate the employee earned that week, pays the premium correctly, and closes the loop: the fully burdened cost, premium included, is posted to the job and cost code to which it applies. That keeps the job cost report accurate, so the P&L by job is one you can rely on.

How does Dapt handle it?

Dapt reads every recorded hour from the time app your crews or caregivers use, with the job, facility, classification or shift on it. It groups the hours by rate, computes the weekly regular rate, and applies the premium to any overtime hours. Dapt submits the payroll batch to ADP, Paychex, Paycom, Paylocity or other payroll system. The batch includes the hours and the calculated rates, so payroll comes out accurate.

After payroll, the payroll results are processed to post the actual cost to your accounting system by job, class, cost code, or other dimension. Prevailing wage hours also carry their fringe, and the certified payroll report shows the overtime at the right rate. A jobsite safety provider in New York runs multiple union rates, guaranteed hours and prevailing wage through this calculation every week. The result is accurate labor costing for your P&L by job.

How can I check my own calculation?

Take one employee’s week from your last payroll. List every hour at the rate it was paid, add up the straight-time pay, and divide by the total hours to get the regular rate. Multiply the hours over 40 by half that rate. If the overtime premium on the pay stub is different, the payroll is using one of the rates instead of the weighted average, and the difference compounds across every employee with two rates every week. The rule is 29 CFR 778.115, linked above.

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Related questions

Does the fringe count in the regular rate on prevailing wage work?

Fringe paid in cash is included in the regular rate; fringe paid into a bona fide benefit plan is not. Davis-Bacon fringe benefits covers the distinction.

What if the state rule is stricter?

Some states require daily overtime or a different calculation. The stricter rule applies. Dapt applies the rule set up for each state.

Does this apply to 1099 contractors?

No. Overtime under the FLSA applies to non-exempt employees. Contractors are paid by their agreement.

Talk to us

Connect with our team for a guided technology discovery session. We know this stack well. We can walk through how it would fit your payroll workflows, and what real-time job costing would look like for your jobs, without changing how your teams work. Contact us to get started.