How to Figure the Weighted Average in Payroll for Dual Pay Rates
When an employee works two jobs for the same employer at different pay rates, the employer may use the weighted average of the two rates to figure overtime pay. The Fair Labor Standards Act governs federal overtime laws and weighted average computation rules. If you have an employee who performs dual roles at dual rates, you might need to figure the weighted average.
Determine the pay rates for the respective jobs. Assume that as a receptionist, the employee earns $9 per hour and as a customer service representative, she earns $11 per hour.
Figure total regular and overtime hours for the workweek. For example, she works seven hours as a receptionist and 43 hours as a customer representative; this totals 50 hours. Under the FLSA, overtime hours are work hours that exceed 40 for the week.
Calculate the total weekly earnings for both jobs. For example, multiply seven hours by $9 per hour, which comes to $63. Multiply 43 hours by $11 per hour, which equals $473. Both jobs combined equal $536.
Divide total earnings by total work hours to get the weighted average of the two rates. For example, $536 divide by 50 hours equals $10.72.
Divide the weighted average by two to arrive at the calculation rate for overtime. Specifically, overtime is normally calculated at 1.5 times an employee’s regular pay rate. During the regular earnings calculation, you paid all hours at straight time, so you only need to calculate overtime hours at half time, or .5. For example, divide $10.72 by 2 to arrive at $5.36, which is the half-time rate. Then multiply 10 overtime hours by $5.36 to arrive at $53.60. Add $53.60 to regular earnings of $536 to arrive at total earnings of $589.60 for the weekly pay period.
If the employee worked fewer than 40 hours for the week at her primary job but has enough hours at her secondary job to warrant overtime, the weighted average rule still applies. For example, if she worked 33 hours at the primary job and 10 hours at the secondary job, she’s due overtime pay for three hours.
Contact your state’s department of labor for weighted average calculation rules, which might be the same as -- or vary in some way from -- the FLSA. For example, Arizona follows federal weighted average laws, but Oregon has its own weighted average rules that include prevailing wage jobs. Prevailing wages relate to contract work performed on government-funded projects.