Overtime: Worker is paid at two rates.
Question: Robert does cleanup work in the evening for my hardware store, and he does general office work during the day. I pay him two different rates. Because his cleaning work is meant to take place after his full-time office job shift, I just pay him overtime based on his hourly "cleanup" rate (which is lower than his rate for the office work). Isn't that the way I'm supposed to do it?
Answer: No. But this will be the final topic in our "overtime" series.
In the past couple of weeks, we've discussed overtime calculations for nonexempt salaried and commissioned employees. Today, we'll review overtime for employees who work for the same employer at two different rates of pay.
Overtime is calculated based on a "regular" rate, which is always an hourly rate. For employees earning only one rate of pay per hour, you don't need to do any calculation to find the regular rate: That hourly wage is the regular rate, and you pay 1.5 times that amount for all hours over 40 in a workweek.
But for nonexempt employees who earn two (or more) rates of pay, employers must use a specific computation for determining the regular rate. This computation involves totaling the straight time earnings at each rate of pay during the week, then dividing that amount by the number of hours worked in the week. The result, called the "weighted average," becomes the employee's regular rate, and you must pay an additional .5 times that rate for all overtime hours worked that week.
For example, if an employee works 16 hours at $10 per hour and 30 hours at $12 per hour, the total straight time earned is $520. That amount is divided by the total number of hours the employee worked (46) resulting in a weighted average hourly rate of $11.30.
Since the employer already has paid the straight time rate for all 46 hours worked, only an additional half-time (.5) of the weighted average is due for the six overtime hours. So the calculation goes like this:
$11.30 (the regular rate) x 0.5 = $5.65. Thus, $5.65 is the half-time rate.
$5.65 x 6 hours of overtime = $33.91. That is the amount of overtime owed for the workweek.
The total wages earned for the 46 hours, including the six overtime hours, is $520 (the straight-time pay) plus $33.91 (the overtime pay) for a total of $553.91.
As another example, let's say you pay Robert $10 per hour for his office work and $8 per hour for his after-hours cleaning. For this workweek, he works 40 hours in the office and seven hours on cleanup duty. You would calculate the overtime as follows:
40 hours in office @ $10 per hour = $400.
7 hours cleanup duty @ $8 per hour = $56.
Total straight time compensation is $400 + $56 = $456.
Total number of hours worked is 40 + 7 = 47.
Divide $456.00 by 47 and you get a regular rate of $9.70. (We are almost done!)
$9.70 x .5 = $4.85, and $4.85 x 7 overtime hours = $33.96
The total compensation due Robert this workweek is $456 + $33.96 = $489.96.
As if that wasn't enough fun, what if an employee works a total of more than 40 hours per week for different employers? We'll discuss joint employment next week.
For more information, visit www.oregon.gov/boli/ta or call (971) 673-0824.
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|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Mar 4, 2007|
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