Overtime Calculation
Overtime refers to hours worked by an employee more than 40 hours per week. Under the Fair Labor Standards Act (FLSA), most employees must receive 1.5 times their regular pay for any work exceeding 40 hours per week. In some cases, however, the employer must use a formula to calculate weighted overtime.
WHAT IS WEIGHTED OVERTIME COMPENSATION?
Weighted overtime is also called “mixed” overtime. It is most often used in situations where an employee performs several types of tasks in a company and receives different rates for them. The weighted average of overtime uses a formula to obtain the average of an employee’s different rates of pay so that he or she can be paid for overtime without the employer having to calculate and add overtime pay for each pay range separately.
Combined over time can also be used in situations where an employee works overtime and also receives tips or commissions as part of his or her compensation.
THE METHOD OF CALCULATING OVERTIME HOURS
Some payroll software automatically calculates the weighted average number of overtime hours of employees. It is also possible to calculate overtime manually.
Start by multiplying the hours worked by each of the rates of pay. Add the totals to obtain total compensation and divide this number by the hours worked to obtain the regular salary scale. This is the weighted average.
Then multiply the weighted average by 1.5, the overtime rate. Multiply the overtime rate by the number of hours worked by the employee to earn overtime.
Multiply the weighted average by 40 hours. This is the total linear time saving. Add this figure to the overtime pay to obtain the amount to be paid for overtime.
Here is what this formula looks like in action:
Suppose that David works $15 for half of his work tasks (25 hours) and $20 for the other half. He worked 50 hours, which means he worked 10 hours overtime.
(25 hours x $15) + (25 hours x $20) = 875
875 / 50 hours worked = $17.50 / hour
David’s regular rate is $17.50 / hour.
17.50 x 1.5 (the amount you multiply to get the overtime rate) = $26.25 / hour
26.25 / hour x 10 overtime hours = $262.50
$262.50 is David’s total overtime salary for this week.
17.50 x 40 hours in a full work week = $700
$700 is David’s total regular rate earnings.
$700 + $262.50 = $962.50
David’s total weekly pay, using weighted overtime, is $962.50.
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Payroll Management
Overtime Calculation
Time & Attendance Management
Document Management
Employee Self Service Management
Performance Management
Performance Appraisal
Benefits Management
Attendance management
Email Integration
Project Management
Workflow Management
Dashboard
Employee Lifecycle Management
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How to use IceHrm to calculate Overtime?