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Calculating overtime when the employee works at two different wage rates

July 13, 2012

Article courtesy of SBAM Approved Partner ASE

By Michael J. Burns

Recently ASE has taken calls from members asking how to calculate the correct overtime rate when a single non-exempt employee works two different jobs at two separate wage rates in the same week. The question has come up when the employer engages a non-exempt employee in two distinctly different jobs that pay different rates. It has also come up when the same job requires a lot of travel and the employer pays one wage rate for the work done in the office and a different rate for work done when the employee is traveling.

One approach that would incur additional cost but is more straightforward is to simply pay overtime at the rate of time-and-one-half on the higher of the two rates being paid.

There is a second approach that costs the employer less and is still acceptable to the Department of Labor’s Wage and Hour division. In this approach, the employer takes the weighted average of the two rates during the week overtime is worked, and calculates the time-and-one-half rate on that weighted average.

For example, say you have an employee who regularly works 35 hours in the office per week, but also has to spend an additional 10 hours a week traveling on the job (remember—commuting time to and from work does not count).

The employee earns $15 an hour for her regular in-office work and gets paid only $10 an hour for travel time. So she earns $525 for her in-office work (35 x $15) and another $100 for her travel time (10 x $10).

That makes for a total weekly compensation of $625 for 45 hours of work ($525 + $100).

To determine her average pay rate, divide her total weekly compensation ($625) by the total number of hours worked (45). That comes to an average hourly rate of $13.89. The employer must pay overtime at the rate of $20.84, which is 1.5 times her average rate of pay. In this case, the employee has earned $659.80 for the week (40 hrs. at $13.89/hr. plus five hours at $20.84/hour).

As always, any employer in this situation must carefully communicate this method to the employee to avoid confusion and get her or his buy-in to the approach.

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