Employees who do two different types of tasks may be paid different hourly rates during the workweek. Or, an employee may work in two or more different positions during the same workweek at different rates of pay. But how do you calculate the overtime?

The general rule is that all hours worked in all positions and at all rates are counted toward the weekly total for the purpose of determining whether the employee is owed overtime.

When an employee receives different hourly rates of pay throughout the week, generally, you determine the regular rate by dividing the total compensation received during the workweek by the total number of hours worked. This will product a “weighted average” or “blended rate.”

Example: Hank works as a nonexempt insider sales representative 37.5 hours a week at an hourly rate of $12. To earn extra money, he works weekends in the company’s warehouse at an hourly rate of $8.

This week, he worked his usual 37.5 hours in the office plus 7.5 hours in the warehouse. His gross pay can be calculated as follows:


Office work

37.5 hours @ $12/hour

$450

Warehouse work

7.5 hours @ $8/hour

$60

Total hours for the week

 

45

Total $ for the week

 

$510

Blended hourly rate

510 divided by 45

$11.33

Blended overtime rate

11.33 x1.5

$17

Oertime premium:

$5.66/hour

 

Gross pay:

 

 

 

37.5 hours @ $12

$450

 

7.5 hours @$ 8

$60

 

5 hours @ $5.66

$28.33

Total pay

 

$538.33

Note: the employee and employer may agree to an arrangement (agreed to before work is performed) that the overtime will be paid at the rate of the job being performed when the overtime occurs.

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What About Delayed Payments?

Employers may have to retroactively calculate the regular rate and overtime owed for commissions, bonuses, or other forms of compensation that are paid irregularly or cannot be identified with a particular workweek.

If any employer does not know the amount of a commission or bonus until the end of the month, quarter, or year, it may temporarily disregard it in making weekly overtime pay calculations.

However, once the payment is made, the employer must retroactively calculate and pay any overtime owed for those weeks.

The payment may be issued as a separate check, or included in the employee’s next paycheck or a bonus check.

Here’s how it works. First, if possible, the employer must attribute the commission or bonus back to the specific workweek in which it was earned. If that is possible:


  • Recalculate the employee’s regular rate of pay with the commission or bonus added in.
  • Subtract the original rate of pay from the adjusted rate of pay to find out how much it was increased by the bonus or commission.
  • Pay the employee one-half the amount of the increase for each overtime hour worked in that week.

When You Can’t Attribute

When it is impossible to attribute the bonuses and commissions to the actual week in which they were earned, some other reasonable and equitable method of allocation must be adopted. For example, it may be reasonable and equitable to assume that the employee earned an equal amount of bonus or commission during each week of the period covered by the bonus.

Note; It is generally not acceptable to simply attribute a commission or bonus earned over time to the single workweek in which it is calculated and/or paid.

Example: At the end of December, Robert received a $600 longevity payment based on his years of continuous service with the company. The payment was made pursuant to a long-standing policy set forth in the company’s employee handbook. During the year, Robert worked 2,000 regular hours and 500 overtime hours. He was paid his standard hourly rate for the 2,000 hours and time and one-half for 500 overtime hours.

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When he receives his $600 payment, he is entitled to receive additional overtime compensation as follows:

First, the $600 payment is apportioned to the 2,500 hours worked, which comes out to $.24 per hour. ($600÷2,500 hours).

His regular rate has increased  by $.24 per hour. That means Robert is owed an additional $.12 for each overtime hour worked during the year.

Thus Robert is owed an additional $60 in overtime pay. (500 hours X .12

Forgetting to go back and make these recalculations is one of the most common wage-hour mistakes.

In tomorrow’s Advisor, excludable compensation and an introduction to the guide some call the “Wage and Hour Bible.”