Weighted overtime is used when an employee works multiple shifts earning different rates for each shift. A blended rate is used to calculate the overtime rate to pay that employee. You can add the weighted overtime earnings code to your payroll to automatically calculate the weighted overtime pay rate in these situations.
Weighted overtime is commonly used to calculate overtime for employees working multiple shifts paid at different rates such as the healthcare and construction industries.
Simplifying the weighted overtime calculation
Calculating overtime pay can be tricky when employees work at different hourly rates. Most companies use a standard approach: regular hours are paid at the normal hourly rate, and any hours worked beyond a standard workweek (usually 40 hours) are paid at 1.5 times the regular rate. But what happens when an employee works at multiple rates? This is where the Weighted Overtime (WOT) earning code comes into play.
Understanding the regular overtime calculation
The typical overtime calculation for most states used by employers is any hours worked over 40 hours is considered overtime and should be paid at time and a half.
Here's how it works:
Regular Hours: Employees are paid their regular hourly rate for the hours worked within the standard workweek (e.g., 40 hours at $15 per hour).
Overtime Hours: Any hours worked beyond the standard workweek are paid at a rate of 1.5 times the regular rate (e.g., $15 per hour * 1.5 = $22.50 per hour).
The challenge
Now, imagine an employee works under two different earning codes, such as "Job 1" at $15 per hour and "Job 2" at $20 per hour. The issue arises when calculating overtime pay, as there isn't a single consistent hourly rate.
The solution: the weighted overtime earning code
The solution is to add a weighted overtime earning code, which simplifies overtime calculations for mixed-rate work. By using this earning code, you let the system handle the complexity. Here's how it works:
System Calculation: adding the weighted overtime earning code allows the system to automatically calculate the weighted overtime rate. The weighted overtime rate does the following:
Reports the overtime under two line items on the employee’s paycheck.
First line item will report Overtime with the hours worked at a Job with the assigned regular hourly rate, or 1.0 times the hourly rate.
The second line item will report Weighted OT using the blended rate between all the hourly rates for each Job the employee worked, or 0.5 times the blended rate.
Calculation used for the 0.5 Overtime Rate: To determine the rate for the 0.5 portion, the system considers the total hours worked and the total earnings:
If the employee works a total of 48 hours
24 hours at $15 per hour ("Job 1")
24 hours at $20 per hour ("Job 2"),
The total earnings are (24 hours * $15/hour) + (24 hours * $20/hour) = $360 + $480 = $840.
The system then divides the total earnings by the total hours worked: $840 / 48 hours = $17.50/hour.
The blended rate per hour is $17.50.
The weighted overtime rate is used to pay the 0.5 overtime pay. The calculation is using the 0.5 * the blended rate. In this example, 0.5 * $17.50 = $8.75 per hour.
By using the weighted overtime earning code, you simplify the overtime calculation for mixed-rate work, ensuring employees are paid fairly and accurately. The system automates the process, saving you time and reducing the risk of errors in overtime pay calculations.
Add the weighted overtime earning code
Adding the weighted overtime earning code to your payroll set up allows you to select the code when you process payroll.
Log in to Fingercheck as an Administrator.
Select SETUP > Payroll > Earnings.
Click Add.
Select the predefined template for Weighted Overtime:
Click the Add button for that template.
Enter the codes to use for the weighted overtime calculation.
Click Continue.
Click OK.
Click the X in the top-right corner to close the Add Earning panel.
The earning code appears in your list of codes.
Pay employees weighted overtime
Fingercheck will automatically calculate the weighted overtime based on the the employee’s Job rate and hours worked at each Job.
Log in to your Fingercheck account as an Administrator.
From the Payroll Entry, or Step 4, of the payroll process find the employee to view their check.
Next to the employee’s name click the Quick Actions menu (Hamburger) icon.
If you would like to view the employee’s hours worked at each Job, select Edit Check.
Click Save to continue with the payroll process.
Click Next to continue to Run Payroll.
View the employee’s earnings by selecting their name.
The weighted overtime is a blended rate calculated from the rates under Jobs 1 and 2, along with the hours worked by the employee for each job.
The example below shows how the employee’s overtime was paid:
4 hours overtime paid at the regular hourly rate of $20, at NYC Site 2
4 hours at the weighted overtime hourly rate of $8.75, at NYC Site 2
Total wages including overtime amount = $115
FAQ
How will the weighted overtime appear on the employee’s paycheck?
The employee’s paycheck will show all the hours they worked for each Job. The overtime hours and pay will be split between Overtime and Weighted OT. The weighted overtime is a blended rate calculated by total earnings divided by the total number of hours worked.
Is there anything I need to do to have the weighted overtime calculate?
No. You just have to add the Weighted Overtime earning code to your payroll, and Fingercheck will take care of calculating employees’ overtime pay when they work jobs paying different rates.
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