Are You in FLSA Compliance using Weighted Overtime?

Weighted Overtime and FLSA Compliance

The United States federal Fair Labor Standards Act (FLSA) requires employers who have hourly employees that earn more than one standard wage to implement weighted overtime when employees work more than 40 hours in a given week. Weighted overtime is an average of the different wages worked, taking into consideration how long the employee worked earning each wage category.

For non-exempt salaried and hourly employees, weighted overtime can encompass different pay rates and shift differentials based on shift, cost center, department, job class, task, and time of day. The federally mandated minimal overtime rate is 1.5 times the employee’s normal rate. For employees who earn only one wage, weighted overtime does not come into play. But for those who earn more than one wage in a pay period, you must average their time worked at each rate.

How to Calculate Weighted Overtime

Calculating weighted overtime is a step-by-step process that can take time to evaluate, even for experienced payroll professionals.

1. Total the regular earnings by adding together the regular wages multiplied by the hours worked at each wage.
2. Divide the total regular earnings for the pay period by the number of hours worked in total to find the weighted average pay rate.
3. Multiply the average pay rate by 0.5 to calculate the additional overtime rate.
4. Multiply the additional overtime rate by the number of overtime hours worked to determine your additional overtime wages owed.
5. Add the overtime wage to the total regular wage to find the total wages due.

For a relatively simple example, take an employee who works 30 hours at a rate of $15 per hour and 20 hours at a rate of $20 per hour in a pay period:

While this process is not difficult, it takes time to calculate the wages for each weighted overtime employee. Manual weighted overtime calculations are prone to user error even while using spreadsheets and calculators to handle the math.

For the best assurance that you are in full compliance with the FLSA while managing wages for weighted overtime employees, we recommend using an automated time and attendance system, especially one with a flexible and configurable payroll rules engine.

Schedule a free demo with Journyx to see how our timekeeping solutions can reduce the administrative time spent on manual calculations, eliminate errors and improve workforce visibility.