Weighted average overtime rate
The weighted average overtime rate is the federal regular rate for a week at two or more pay rates: straight-time earnings divided by hours worked.
- LAW
- FLSA §7(a); 29 CFR 778.115
- BOUNDARY
- Every rate worked in one workweek
- FORMULA
- Straight-time earnings ÷ total hours worked
- WATCH FOR
- Overtime at one rate without a prior agreement
Multiple pay rates arise when job, shift, location, skill, union class, or a prevailing-wage assignment sets a different rate for some hours. In such a week, federal overtime generally runs on the weighted average, not on the 41st hour’s rate. Each hour over 40 earns 1.5 times that average. Straight-time pay already covers every hour at its own rate, so the amount still owed is half the average per overtime hour.
How is the weighted average calculated?
Consider an employee who works 45 hours in one workweekWorkweek (FLSA). A workweek under the Fair Labor Standards Act is a fixed, regularly recurring period of 168 consecutive hours used to compute overtime.Click to open the term, 30 at $18 an hour and 15 at $22 an hour.
- 01
Add the straight-time earnings at each rate: 30 hours at $18 is $540, and 15 hours at $22 is $330, for $870.
- 02
Divide by all 45 hours worked for a weighted average regular rate of $19.33.
- 03
Take half that rate, $9.67, as the premium for each of the 5 hours over 40, for a total overtime premium of $48.35.
- 04
Add the premium to straight-time earnings: $870 plus $48.35 comes to $918.35 for the week.
When can you use a different overtime rate?
You and a non-exempt employee may agree before the work is performed to use the rate in effect during overtime hours. That alternative is available only under conditions in current wage-and-hour regulations, and it is not automatic. The rate must be bona fide: at least the minimum wageMinimum wage. Minimum wage is the lowest hourly rate you may legally pay a covered employee, set by federal, state, and sometimes local law.Click to open the term and the rate actually paid for that work in straight-time hours. Bonuses and other includable pay still need their own overtime.
| METHOD | OVERTIME FOR EACH HOUR OVER 40 | CONDITION |
|---|---|---|
| Weighted average | Half the average, on top of straight time | None; the default for a multi-rate week |
| Rate in effect | 1.5 times the rate for the work done that hour | Prior agreement, bona fide rate, overtime on bonuses |
What else changes the weighted average?
A nondiscretionary bonus or a rate corrected after the fact also changes the week’s regular rate. Each can raise that workweek’s overtime even if the base hourly rate never moved. Multi-rate overtime rules can vary by workforce and by state. Confirm the current requirement with a qualified wage-and-hour professional before assuming a shortcut method applies.
Frequently asked
- 29 U.S.C. §207, Maximum hours
- 29 CFR 778.115, Employees working at two or more rates
- 29 CFR 778.419, Hourly workers employed at two or more jobs
- U.S. Department of Labor, Fact Sheet #23: Overtime Pay Requirements of the FLSA
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.