How to Calculate Overtime Using Blended Rates
The first step of staying compliant is understanding that a penalty is owed. The second part? Accurately paying the correct violation amount.In the most simple case, where employees don't receive any bonuses and other forms of payment that are included in blended rate calculations, find an employee's blended rate is fairly straightforward. To help shed some light on how to calculate blended rates, here are 3 simple steps:
- Determine the hourly wage for each position. For example: Joe works as a dishwasher with the hourly wage of $13.00 and as a host with an hourly wage of $12.00
- Determine the amount of hours worked in each position. For example: Joe worked 15 hours as a dishwasher and 12 hours as a host.
- Take the total amount of wages (($13.00x15) + ($12.00x12)) and divide by the total number of hours worked (27)= $339 / 27 = $12.56 blended rate
Ta-da! You know have the employee's blended rate. Bear in mind that there are other instances where other forms of commission like bonuses based on performances or attendance, etc. Now that you have a blended rate, you can calculate your employee's overtime pay.
Here's an example:
Restaurant A's workweek is from Monday to Sunday. Joe worked 8 hours daily from Monday to Wednesday as a host with an hourly rate of $12.00 / hour and 8 hours daily from Friday to Sunday as a dishwasher with an hourly rate of $13.00 / hour. He did not work more than 8 hours in 1 workday, therefore he does not have any daily overtime but he has worked in excess of 40 hours during the workweek.
To calculate his overtime pay:
- Take the total amount of hours (48) and subtract 40 hours to get the amount of overtime owed = 8 hours weekly overtime
- Determine the blended rate by taking the total amount of wages (($13.00x24) + ($12.00x24)) and divide by the total number of hours worked (48) = ($312 + $288) / 48 = $12.50 blended rate
- Multiply the blended rate from the example above by 1.5 to get the blended overtime rate = $18.75 overtime blended rate
- The total overtime pay owed = ($18.75 x 8 hours) = $150.00 of overtime pay
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