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I. Employees Working at Two or More Rates

 

In the situation of an employee who works two different jobs at two different rates of pay, the FLSA allows two different methods of computing the regular rate for overtime calculation purposes: 1) the weighted average and 2) the regular rate associated with the job that caused the overtime to occur. The "default method" under the regulations is the weighted average method, found in 29 C.F.R. 778.115. The other method is allowed under section 207(g)(2) of the Act and is explained in regulation 29 C.F.R. 778.419. The two regulations that deal with those methods are shown below (the first deals with the weighted average method, and the second deals with the other method), along with examples of each:

 

29 C.F.R. 778.115 - Employees working at two or more rates.

 

Where an employee in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs. Certain statutory exceptions permitting alternative methods of computing overtime pay in such cases are discussed in 778.400 and 778.415 through 778.421.

 

Example of how to use the weighted average method:

 

An employee works 40 regular and 4.5 overtime hours at $10 per hour for clerical work at the office. During the same workweek, she also works eight hours at $8 per hour answering the phone at her house, resulting in 52.5 total hours worked at both jobs during the workweek.

 

If you are using the weighted average method, you would take her earnings from the clerical job (44.5 hours at $10/hour, or $445.00) plus her earnings from answering the phone at home (8 hours at $8/hour, or $64.00), to get a total of $509.00. You then divide the total earnings by the total hours ($509.00 / 52.5) to arrive at the weighted average regular rate of $9.70 per hour. Now, remember that the total earnings of $509.00 represent the straight-time pay she has earned for the 52.5 hours, i.e., she has already been paid straight time for those hours, and so she only needs half-time for the 12.5 overtime hours to bring her up to the required time and a half. Half-time for the weighted regular rate is $4.85/hour, so multiply that times the 12.5 overtime hours and add it to the straight-time pay to get the total pay for the workweek. That would be $4.85 times 12.5, or $60.63, and that added to $509.00 equals $569.63, the total pay including overtime. A mistake sometimes made is to compute the weighted average correctly, but then apply it erroneously, such as by taking the weighted average, multiplying it by 1.5, and then multiplying that times the number of overtime hours worked and adding that to the straight-time pay. Such a calculation ($509.00 plus 12.5 hours at $14.55 per hour) would result in a figure of $690.88, which would actually result in a large overpayment. The first thing to remember is that when you do a weighted average, it is as if you are pretending that she really worked "x" number of hours at the weighted average rate. The second main thing to keep in mind is that the weighted average times the number of hours worked equals the total straight-time earnings for the workweek, and an employee only needs to be paid the straight time once. Any time you use an overtime calculation method that depends upon a total straight time figure, the overtime hours will be paid at "half time", instead of time and a half. A similar situation exists in the case of employees who are paid a fixed salary for fluctuating workweeks. The salary in that particular case is considered to be straight-time pay for all hours worked, so the overtime hours only need to be compensated at half-time to bring the person up to time and a half. You can use the calculator below to see how the weighted-average regular rate of pay is calculated and how it affects the overtime pay and gross pay for a workweek (note: you must have JavaScript enabled in your browser to use the calculator below; this utililty is not intended to be a substitute for the advice or assistance of a payroll professional, nor is it an official pay calculator - it is here only to help illustrate the principles behind the overtime pay calculation when the weighted-average method applies):

 

Weighted-Average Calculator

(When entering figures into the blanks provided in the first set of fields (the hours and pay rates for jobs 1 and 2), enter only numbers - no dollar signs or commas are needed. For fractions of hours, convert fractions to decimals first, then enter the decimal numbers, rounding to the nearest tenth or hundredth of an hour, depending upon how exact you would like the calculation to be.)

x = Straight-Time Pay 1
  x   =  
x = Straight-Time Pay 2
  x   =  


Total Straight-Time Pay / Total Hours = Weighted-Average Regular Rate of Pay
  /   =  

(1/2 Regular
Rate
x OT Hours) + Total Straight-
Time Pay
= Gross Pay
( x  ) +   =  

Note: The pay amounts shown above have been rounded up or down to the nearest penny.

 

29 C.F.R. 778.419 - Hourly workers employed at two or more jobs.

 

(a) Under section 7(g)(2), an employee who performs two or more different kinds of work, for which different straight time hourly rates are established, may agree with his employer in advance of the performance of the work that he will be paid during overtime hours at a rate not less than one and one-half times the hourly non-overtime rate established for the type of work he is performing during such overtime hours. No additional overtime pay will be due under the act provided that the general requirements set forth in 778.417 are met and;

 

(1) The hourly rate upon which the overtime rate is based on a bona fide rate;

(2) The overtime hours for which the overtime rate is paid qualify as overtime hours under section 7(e) (5), (6), or (7); and

(3) The number of overtime hours for which the overtime rate is paid equals or exceeds the number of hours worked in excess of the applicable maximum hours standard.

 

(b) An hourly rate will be regarded as a bona fide rate for a particular kind of work [if] it is equal to or greater than the applicable minimum rate therefore and if it is the rate actually paid for such work when performed during non-overtime hours.

 

Example of how to use the method allowed under section 207(g)(2):

 

Same basic situation as above: an employee works 40 regular and 4.5 overtime hours at $10 per hour for clerical work at the office. During the same workweek, she also works eight hours at $8 per hour answering the phone at her house, resulting in 52.5 total hours worked at both jobs during the workweek. The office work was done Monday through Friday for eight hours per day, and 4.5 hours on Saturday. The phone duties at home were done Monday through Thursday, two hours each evening. The company observes a Monday through Sunday workweek.

 

In this case, the requirements of section 207(g)(2) and regulation 778.419 would have to be met, i.e., the employer would have had to agree prior to the start of the work that overtime would be paid based upon the regular rate associated with the job that caused the overtime, and the other requirements of those provisions would have to be satisfied. In addition, the employer would have to keep very reliable records of the hours worked for both jobs, especially since both jobs may contribute to the overtime total. The important thing is to be able to pinpoint exactly when the employee passes the 40-hour mark for the workweek. In the example given, the employee reaches that point after completion of the evening phone shift at home on Thursday. Thus, all hours worked on Friday and Saturday (12.5) would be paid at 1.5 times the regular rate associated with the clerical work done at the office. Her pay would be calculated as follows:

 

32 times $10.00/hour   $320.00  Straight time

8 times $8.00/hour   $64.00  Straight time

12.5 OT hours x $10.00 times 1.5 $187.50  Overtime

Total:     $571.50

 

Now, imagine that the phone work at home is done Tuesday through Friday. The situation would then be a bit more complicated, since both jobs would contribute toward the overtime. The 40-hour point would be reached two hours into the Friday shift for the clerical work at the office. The six hours remaining at the office on Friday, plus the two hours working the phone at home that evening, plus the 4.5 hours at the office on Saturday, would be the overtime hours for that workweek. The total would still be 12.5 hours, but there would be two regular rates involved. The overtime pay would consist of 10.5 hours at 1.5 times the regular rate for the office work, plus two hours at 1.5 times the regular rate for the phone work at home. Her pay would be calculated as follows:

 

34 hours times $10.00/hour  $340.00  Straight time

6 hours times $8.00/hour  $48.00  Straight time

10.5 OT hours x $10/hour x 1.5  $157.50  Overtime

2 OT hours x $8/hour x 1.5  $24.00  Overtime

Total:     $569.50

 

One can see from these examples that the end results are often very close to each other and that the result with the second method depends upon the exact mix and timing of the overtime hours.

 

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