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Compensation &; Payroll
Calculating Overtime Pay When an Employee Works Two Jobs
Q: We would like to have a nonexempt employee work two jobs for us; however, each job has a different hourly rate of pay. Which rate of pay is used to calculate the employee's overtime pay?
A: Under federal law, there are two approaches an employer can take when handling this situation. The first method involves paying overtime based on the “regular rate,” also referred to as the “weighted average.”
To determine the regular rate, the total amount earned by the employee in both straight-time pay rates is divided by the total number of hours worked in that specific workweek.
For example, suppose your employee works a 38-hour week in her primary job and is paid $12 per hour. In that same week, she works 12 hours in her secondary position, where she is paid $9 per hour. The total number of hours worked is 50; therefore your employee has worked 10 hours of overtime.
With any nonexempt employee, federal law requires that overtime be paid for all hours worked in excess of 40 in any given workweek. In order to determine the regular rate, the calculation is as follows:
- (38 hours x $12) = $456 and (12 hours x $9) = $108
- $456 + $108 = $564
- $564/50 hours worked = $11.28 per hour. $11.28 is her “regular rate.”
To determine this employee's “overtime half-rate,” multiply $11.28 by .5 for a total of $5.64.
Then, multiply $5.64 by 10 overtime hours for a total of $56.40. This employee's total wages for the week will be $564 plus $56.40, which equals $620.40.
When calculating overtime using the second method, the employer and employee must reach an agreement in advance of the hours worked. They may agree to pay the employee one and one-half times the hourly nonovertime rate for all overtime hours worked based on the position worked when the overtime hours occurred.
Using the previous example, if the employee worked in the position that paid $9 per hour during all overtime hours, the overtime is paid using the $9 per hour straight rate and an “overtime rate” of $13.50 ($9 x .5 = $4.50; $9 + $4.50 = $13.50). The employee then earns $456 for the time worked in her primary position, $18 for the two straight hours worked in the secondary position (2 hours x $9), and $135 for the 10 hours of overtime (10 hours x $13.50) for a grand total of $600.
Article by Bill Schaefer, SPHR, is an HR knowledge advisor in SHRM's HR Knowledge Center from http://www.shrm.org/kc/solutions/articles/archives/CMS_023246.asp#P-8_0
