What Is Weighted (AKA Blended) Overtime? How Do You Calculate It?

Weighted overtime, or blended overtime, is a little complicated but necessary if certain criteria are met. 

You use it when your non-exempt employee makes more than one pay rate and works overtime in a workweek. Let’s talk about how can this happen and what you need to do.

At CSI Accounting & Payroll, we’ve provided financial services to small businesses for nearly 60 years. That means we’ve talked to hundreds of clients who have been in this scenario and had these questions:

• What do weighted and blended overtime mean?
• When would an employee make different pay rates in a single pay period?
• How do I calculate weighted overtime?

Defining Weighted / Blended Overtime

Remember, weighted (or blended) overtime is used when a non-exempt employee makes more than one pay rate and works overtime in a workweek.

Do weighted overtime and blended overtime mean the same thing? Yes! If you use payroll software, it may refer to this scenario as only one term or the other – but it means both interchangeably.

Most online answers to this question are focused on nuances, but weighted and blended overtime mean the same thing because they are calculated the same way.

When Employees Make Different Pay Rates in a Workweek 

Let’s discuss the four scenarios when an employee would need weighted overtime pay because they make more than one pay rate in a workweek:

• Pay raises. You can avoid factoring this into weighted overtime by granting a raise between pay periods or during a pay period when no overtime will be worked. 

• Non-discretionary bonuses. These are agreed to ahead of time, and your employee hits a specified benchmark to get them. Though not necessarily a different pay rate, they need to be added to the overall rate of pay. Similar to raises, you can avoid factoring this into weighted overtime by granting it when no overtime will be worked.

• Multiple roles. When an employee does different jobs for you with different pay rates (such as being a server for $15/hour and a bartender for $18/hour), they will have two different pay rates. If they work both of those roles and work overtime in one pay period, you’re on the hook for weighted overtime pay.

• Shift differentials. You may pay different rates for night shifts, weekend shifts, or working in hazardous conditions. The employee could have at least two different rates of pay if they work different shifts in the same pay period. Then, if they work overtime, you need to provide weighted overtime pay.

How to Calculate Weighted Overtime

While checking the accuracy of online calculators and popular AI models, we noticed that the weighted overtime rates were correct, but they kept giving incorrect total paychecks. That’s why we couldn’t find any that we would recommend.

We found that professional payroll software accounts for more of the required data – but you still need to know how to enter it correctly, otherwise, you’ll have the same problem.

While we’ve never had any clients get audited for incorrect paychecks with weighted overtime, it’s certainly possible. 

So, where should you put your trust? Start with learning the basic equations and required information!

Equations & Other Knowledge

Before we get into the examples, you need to know:

• Weighted overtime is properly calculated per week. That means that if you have a bi-weekly payroll, you’ll need to separate the data from the two weeks. You may have two different weighted overtime rates in one paycheck.

• Straight-time earnings = (# hours worked at Pay Rate A x Pay Rate A) + (# hours worked at Pay Rate B x Pay Rate B), etc. if there are more pay rates. This is only used to calculate the weighted rate. Do not add this number to the overall check, as it contains overtime hours.
  

• Total hours refers to the hours worked per week.

• Weighted rate = Straight-time earnings / Total hours.

• Overtime rate = Weighted rate x 1.5. The 1.5 is the federal overtime rate, often called “time and a half”.

• Find your overtime hours. This is where calculators and AI models really struggle. To get the accurate base pay (and accurate total paycheck), find out which hours are overtime and which are standard. While federal law (FLSA) says that overtime is the last hours worked beyond a 40-hour work week, there are also state overtime laws. For example, California says that overtime is also any hours worked beyond an eight-hour day. See state overtime laws here.
  

• Overtime pay = # of overtime hours x Overtime rate.

• Find your base pay. After removing the overtime hours from the pay rate(s) that they’re associated with, you can calculate the base pay. It will use the same equation as Straight-time earnings, just with those overtime hours removed.

• Final pay = Base pay + Overtime pay.

Let’s put some numbers to it!

Example #1

Your employee works 20 hours at $15/hour and 25 hours at $20/hour during one week.

Straight-time earnings: (20 hours × $15) + (25 hours × $20) = $800

Total hours: 20 hours + 25 hours = 45 hours

Weighted rate: $800 / 45 hours = $17.78

Overtime rate: $17.78 x 1.5 = $26.67

In this example, let’s go the FLSA way and assume that five hours are overtime since it’s a 45-hour work week. (Remember, this is just an example, and you may also have to adhere to your state’s overtime laws!)

Overtime pay: 5 overtime hours x $26.67 = $133.35

Now, remember the rest of the check is where things start to go wrong for calculators and AI models. In this example, let’s assume that all five of those overtime hours were worked at the $20/hour pay rate. So the base pay without the overtime would be the equation below:

Base pay: (20 hours × $15) + (20 hours × $20) = $700

Final pay: $700 + $133.35 = $833.35

Example #2

Let’s assume nearly the same scenario – except the overtime hours were all worked at the $15/hour pay rate instead of the $20/hour pay rate shown in Example #1.

Your employee works 20 hours at $15/hour and 25 hours at $20/hour during one week. All of the information above will still lead you to the same overtime rate.

…

Overtime rate: $17.78 x 1.5 = $26.67

We’re still using FLSA to assume that five hours are overtime since it’s a 45-hour work week.

Overtime pay: 5 overtime hours x $26.67 = $133.35

Here’s the difference again. Let’s assume that all five of those overtime hours were worked at the $15/hour pay rate. So the base pay without the overtime would be the equation below:

Base pay: (15 hours × $15) + (25 hours × $20) = $725

Final pay: $725 + $133.35 = $858.35

Feel Confident in Your Overtime Compliance!

No matter where overtime is worked in the examples above, the overtime rate is the same. However, there’s a difference of $25 between the final pays. 

Why is that? The overtime hours are worked at different pay rates, resulting in different base pays. That, plus specific overtime laws, is what calculators, AI models, and incorrectly-used payroll software miss out on – but now you know!

Now that you know what weighted and blended overtime mean, when an employee makes different pay rates in one pay period, and how to calculate weighted overtime and final pay, you may feel hesitant about determining where overtime was worked. If so, payroll software alone may not be enough for you. 

What about a payroll service with an expert to guide you? To see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! First, learn more about the different types of advice that payroll specialists can provide.