Overtime payments are generally calculated at one and a half (1.5) times the employee's regular rate of pay for all hours worked beyond 40 hours in a week. For a variety of reasons, a client may want to calculate overtime payments using the weighted average method instead. Some scenarios include:
The client has a non-exempt employee who holds more than one position/job description with the company, each with a different hourly rate of pay, and has overtime hours.
The client has a non-exempt employee who has overtime hours and is partially compensated by a non-hours-based payment, such as commission.
The client has a salaried, non-exempt employee and pays the employee a fixed salary for a fluctuating work week. The employee must still be compensated for overtime hours on a half-time basis.
note
Weighted Average Overtime calculations are designed for overtime calculations only and do not apply to double-time calculations.
Set up WAOT pay items for a client
To use the weighted average overtime calculation for an employee, you need to set up one of the client's pay items as special type
Weighted Average Overtime
.
You may also need to set up a pay item as special type Premium Wages, such as in the case of an employee who receives a shift premium. For an example of this, see the following section covering employees who receive a shift premium.
Set up an employee to use a WAOT pay item
To calculate an employee's overtime using the weighted average method, you must set up the employee to use a pay item assigned as special type
Weighted Average Overtime
.
Exclude pay items from WAOT calculations
If an employee has an active pay item set up as special type Weighted Average Overtime, all other pay items active for the employee will also be subject to WAOT calculation. However, you can exclude pay items individually from the WAOT calculation.
Select
Setup
,
Payroll Items
, then the
Main
tab.
Select the payroll item that you want to exclude, then
Edit
.
In the Exclusions section, mark the
Weighted average overtime calculation
checkbox.
Select
Enter
to save the change.
Set up a shift-premium employee to use the WAOT calculation
In some situations, an employer may want to include the dollar amount associated with a pay item in the weighted average overtime calculation, but not want to include the hours associated with the pay item. An example of this would be if an employee is paid a shift premium. You can set up the employee as follows.
Set up one of the payroll items for your client with
Premium Wages
selected in the
Special Type
section.
Add the payroll item to an employee, and in the Payroll Items tab of the Employees screen, mark as active both the pay item set up as special type
Weighted Average Overtime
and the pay item set up as special type
Premium Wages
.
In the
Rate
column, enter the pay rates for the active pay items. The first pay item should use the employee's regular rate and the other pay item (the one that is special type Premium Wages) should use the employee's premium amount.
During payroll check entry for the employee, you should enter hours for the pay item using the regular rate and for the pay item using the premium rate, to compensate the employee for their shift premium.
The check will show double the number of hours worked on the check, but because the hours associated with the premium rate pay items are excluded from WAOT calculation, the amount will be correct.
Enter payroll checks for clients using WAOT
When payroll checks are entered for an employee that is subject to the WAOT calculation, the application uses the following formula to calculate the employee's overtime.
The total gross pay of all pay items / the total hours entered (excluding Premium Wages pay items and any other excluded pay items) = Average Regular Rate.
The Average Regular Rate x 0.5 (WAOT rate) = Premium Overtime Rate.
The Premium Overtime Rate x total Overtime hours entered = WAOT amount.
Example WAOT calculation
Assume the employee is set up with the following pay items.
Wages 1 (Hourly pay item) - $12.00 rate
Wages 2 (Hourly pay item) - $10.00 rate
Commission (Fixed amount pay item)
Premium OT (Weighted average overtime pay item)
Here is how the WAOT calculation works for this scenario.