The easiest method of calculating the overtime rate is simply to accept the default, which is the highest of the rates you're paying the employee during the pay period. Ludt Payroll always calculates overtime pay at 1.5 times the overtime and double overtime base rate and calculates double overtime pay at 2 times the overtime and double overtime base rate.
Applying a different overtime and double overtime base rate. Nevertheless, there are several other legal ways to calculate the base rate. Some companies must comply with union contracts requiring more complicated methods, such as using an overtime rate based on type of work or using a weighted average.
Determining overtime rate based on type of work performed.To determine an overtime rate based on the type of work performed, you must track the pay rate for each of the overtime hours worked and calculate a blended base pay rate.
The formula for blending two hourly rates is:
|(Overtime Regular Hours x Regular Pay Rate) + (Overtime Hourly 2 Hours x Hourly 2 Rate)|
|/||(Overtime Regular Hours) + (Overtime Hourly 2 Hours)|
For example, suppose John worked the following hours last week:
|Regular Hours||Overtime Hours|
|Regular Pay Rate ($12.00)||28||8|
|Hourly 2 Rate ($10.00)||12||2|
The blended rate to enter for OT and Double OT Base Rate is $11.60: (8 x $12) + (2 x $10) / (8 + 2) = $11.60
For this Base Rate, gross wages are $630.00: (28 x $12) + (12 x $10) + (10 x $11.60 x 1.5) = $630.00
Entering hours and changing the OT and Double OT Base Rate. Follow these steps to change the OT and Double OT base rate when you create a paycheck for the employee.
- Go to the Payday tab
- Click the Check Details icon next to the employee's name.
- Enter the hours worked for each pay rate. The total must be 40 or fewer hours per week.
- Enter the Overtime and Double Overtime hours.
- Enter the OT and Double OT base rate you calculated.
- After you finish filling out the rest of the items, click Create to return to the Create Paychecks page to finish the rest of the payroll.