First, employers must determine whether a nonexempt employee has accumulated enough hours worked to become entitled to overtime pay. Now, let’s assume that the employee has worked enough hours and the issue is how much overtime must be paid.

Mastering HR Report: Overtime

Count on me
Normally, calculating overtime is a pretty simple mathematical exercise — you just determine what the employee’s regular rate of pay was for the week and pay 1.5 times that amount for each overtime hour worked. Thus, an employee who earns $10 an hour and works 44 hours in a week would be paid $460, calculated as follows:

$400 for the 40 straight-time hours ($10 x 40 hours = $400); and
$60 for the four overtime hours ($10 x 1.5 = $15 and $15 x 4 hours = $60).

Easy, right? But what if that scenario took place within a two-week pay period? Let’s suppose the employee worked four extra hours in the first week and then asked to leave four hours early the following Friday? Can you tell him that if he takes the time off, he won’t get any overtime because he will have worked only an average of 40 hours each week? Absolutely not!

Regardless of how long the payroll period runs, an employee’s entitlement to overtime must be calculated on the basis of single workweeks. Therefore, in our scenario, the employee must be paid his four hours of overtime for the first week of the payroll period regardless of how many hours he works or doesn’t work in the second week. You could try to balance the payroll costs of his overtime for the first week by giving the employee six hours of unpaid time off the next week (6 hours of straight time would offset the 4 hours of pay at the overtime rate), but no matter what, you have to pay the four overtime hours in the first week at time and a half.

Counting the time
But what if the employee works two jobs for the same company, you might ask — can we count those hours separately? The answer is almost always “no.” You must count all the employee’s hours together in determining whether he worked more than 40 hours in a week for the company. The only time you are likely to avoid that result is if one of the jobs is exempt from overtime and the exempt job constitutes the employee’s primary duties. This is usually a mathematical determination, but not always.

OK — we know an employee working two different nonexempt jobs must be paid overtime for any hours worked over 40 in a week, but how do you calculate the overtime when the two jobs have different pay rates? The answer lies in what’s called “the blended rate.” Consider an employee who works 30 hours a week as a custodian at $10 an hour and 10 hours in security at $14 an hour. Ordinarily, he would earn $440 per week ($10 x 30 hours + $14 x 10 hours). If the employee needs to work four extra hours on the weekend as a custodian, you must add up the total compensation owed for each job, and then divide that sum by the total number of hours worked to arrive at the regular hourly rate.

In this example, you would divide the total compensation of $440 by 40 hours to arrive at a regular hourly rate of $11. Therefore, you would have to pay $16.50 ($11 x 1.5) for each of the four overtime hours, for a total overtime payment of $66 for the week in addition to the regular $440 earned at the straight-time rate.

Wage and Hour Compliance Manual

That’s for sure
Those are the basics of calculating overtime.Others include how to pay overtime to salaried nonexempt employees, how to figure bonuses and other periodic payments into the overtime rate, and how to handle unique forms of pay such as commissions, piece rates, and daily wages.