HR Question of the Week – November 15, 2015

Question:

My employees have different pay rates depending on what job they are performing (landscaping or snow removal). How should I calculate what rate to use for overtime pay?

Answer:

Most of our clients prefer to use the second method, which is commonly called the “weighted average” overtime calculation method. For the weighted average calculation, you will determine the regular rate of pay for the pay period by calculating the weighted average of the two rates. It is important to note that it does not matter in which position the employee was working for the overtime hours for this calculation. This method is best illustrated by an example.

An employee who is paid weekly works 32 hours as a landscaper at $15 per hours and 16 hours doing snow removal at $11 per hour in one week. In order to determine the pay using the weighted average method you would do the following calculation:

32 hours x $15/hour + 16 hours x $11/hour = $656 (total straight time compensation)
$656 (total straight time compensation) ÷ 48 hours worked = $13.67 (regular rate)
$13.67 (regular rate) x 1½ = $20.51 (overtime rate)
$13.67 (regular rate) x 40 hours= $546.80 (total straight time earnings)
$20.51 (overtime rate) x 8 (