Q&A: Overtime Calculation with Two Different Hourly Rates

Q: My employer pays me at one rate of pay for my regular work, but then pays me minimum wage for travel and attending seminars after-hours. How is my overtime supposed to be calculated?

--Bad at Math (CA)

A: Calculating overtime for an hourly employee who is paid at two separate hourly rates is a fairly complicated analysis and does not come up very often, but hopefully the explanation below makes some sense to you. If you need more help understanding the calculation, please feel free to contact me.

Introduction to the "Regular Rate" (versus the "Base Rate")

An employee's "regular rate" of pay is a legal term for the number used to calculate their "overtime rate" of pay, which is either 1.5 or 2 times the "regular rate," depending on how many hours are worked.

What I call the "base rate" of compensation is the typical rate at which you are paid in a regular day, week or hour of work, whether at an hourly rate, salary, commissions, etc.

Some people get confused by the term "regular rate" and mistake it as a synonym for what I call the "base rate". However, the "regular rate" is only used to calculate the "overtime rate". It really has no other purpose and often bears little resemblance to an employee's actual "regular wages".

In fact, the "regular rate" can often differ greatly from the "base rate," as explained below.

Calculation of "Regular Rate" for Hourly Employees

For hourly employees, the "regular rate" is determined by taking all of the money an employee is paid in any given week and dividing it by the total number of hours worked that week.

The Usual Situation

Hourly employees are usually paid just a straight hourly rate for their "base rate". So, for most hourly employees their "regular rate" is the same as their "base rate".

  • Employee is Paid $15 per hour ("base rate")
  • ($15/hr X 45 hours=$675)/45=$15 ("regular rate")

For purposes of this example, we will assume that he employee worked 40 regular hours and 5 overtime hours. To calculate overtime pay, the "regular rate" is multiplied by 1.5 to determine the "overtime rate", which in this example would be $22.50.

The most common way to calculate overtime in this situation is to multiply the "base rate" by 40 hours to get the employee's "regular pay" ($600), multiply the "overtime rate" by 5 to get their "overtime pay" ($112.50), and add the two figures together ($712.50) to calculate the wages owed.

However, this is not technically correct, because what the law says is that the employee is entitled to additional "premium pay" for overtime hours worked. So really the way this should be calculated is to multiply the number of hours worked by the "base rate" ($675) and then multiply the 5 overtime hours by the difference between the "overtime rate" and the "regular rate" ($7.50) to determine the additional "premium pay" owed and add the two figures together ($712.50) to calculate the wages owed.

The reason you must subtract the "base rate" from the "overtime rate" is because the employee has already been compensated partially for the overtime hours worked at the "base rate".

While both methods seem to work in this example, the reason the longer version is correct becomes apparent from the next example.

The Complicated Situation

When an employee is paid at two different hourly rates for different tasks, the employer must calculate the "regular rate" using a "weighted average" of the different hourly rates.

Using the same example above, assume that the employee is paid $10 per hour for time spent doing janitorial duties at a retail sales job and that the first 40 hours of the week were spent doing sales work at $15 per hour and the last 5 were spent doing janitorial work.

First, calculate the "regular rate," which is done the same as above--by adding all of the money earned by that employee for the week and dividing it by the number of hours worked:

  • [($10/hr X 5 hours=$50)+($15/hr X 40 hours=$600)]/45=$14.44

Second, calculate the "overtime rate" by multiplying the "regular rate" by 1.5 ($21.67). Finally, calculate the "overtime pay" by taking the difference between the "overtime rate" ($21.67) and the "base rate" for the overtime hours ($10.00) and multiply that number ($11.67) by the number of overtime hours worked (5) to determine the additional "premium pay" owed ($58.35).

The total pay for this week should be $708.35.

Again, I know this analysis is complicated, but if you have any questions about whether you are being paid overtime correctly, you should contact an employment law attorney.

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15 Responses to “Q&A: Overtime Calculation with Two Different Hourly Rates”

  1. carol says:

    i feel i have been not getting paid overtime at the 1.5 rate over 40 hrs a week , if one earns 10.00 per hour X 40 , then time and a half X14 hrs should be 15.00 X14. right? i have been paid @ 5.40 as overtime

  2. @carol: I am not sure I understand your question. As I read your question, you get paid $10 per hour for up to 40 hours and then $5.40 per hour for all hours over 40. If this is true then it is likely illegal, although there always some narrow exceptions to every rule and I would need to know more about your situation to be completely sure.

  3. Tom says:

    Can you detail the term "work week" when it comes to overtime hours? My son is working a job where he has one day off per week and the employer is saying he is not due overtime because the "work week" is defined as Monday through Sunday. He hasn't had a work week where he has worked more than 40 hours, but there have been several 7 day periods where he has worked more than 40 hours (i.e. Wednesday to the following Tuesday he worked 46 hours, but the employer's defined work week showed him working less when the weeks were taken as separate).

  4. @Tom: A "workweek" is any defined seven-day period the employer sets and upon which basis the employee is paid (e.g. "pay periods"). The "seventh day" overtime period you are referring to is dependent upon on the "workweek" the employer uses, so unless your son is working Month-Sunday straight there is no additional premium due. However, you refer several times to "40 hours," but in California overtime must be paid BOTH for hours worked over 40 in one week AND over 8 in one day.

  5. Josh E. says:

    In your example, the majority of the workweek was at the higher wage. What happens if the situation is reversed? I work the majority of my hours at a rate of $5/hour. Last pay period, I worked 8 hours of overtime. It broke down like this. S-F I worked 45.88 hours of work with a regular pay of $5/hour, and 6.2 hours of work with a regular rate of $10/hour. The $10/hour was the last day of the pay week. So, this totalled 40 regular hours, 5.88 ot hours of $5/hour, and 6.2 ot hours at $10/hour. My employer used this same formula, which put my weighted ot pay at $8.59/hour. So, effectively, they paid me $1.41 LESS than my NORMAL rate of pay for my entire day of work on Saturday. What is the point of overtime if I get paid less than they normally pay me?

  6. Josh E. says:

    Sorry, I said 8 hours of ot, it was 12.08 hours of ot.

  7. Jennifer says:

    In a collective Bragaining Agreement.
    Is a union employee entitled to thr regular rate of pay? There is no stipulation in regards to regular rate of pay in the collective bargaining agreement. There is a table of hourly contract rate for the employee. The contract states that if you work 12 hours your hours are factored at .7756. (example if the contract rate is $25.00. when an employee is put on a rotating shift they will receive $19.39 for the first 8 hours, the 1.5 X 19.39 = $29.09 for the next 4 hours. Anything over 12 is paid at 1.5 X 25.00= 37.50. The contract does not mention double time or regular rate of pay. Is a union employee entitle to double time and regular rate of pay.

  8. Lauren says:

    How would you do the weigthed average for the following senario?

    Job 1 - Hours worked @ 15.00 = 44.0
    Job 2 - Hours worked @ 10.00 = 7.0
    Total hours for the week = 51.0

  9. Mary Beth B says:

    I am hourly employee that works for a CPA firm, Hours that are worked very. So say I work 11.5 hours Monday through Thursday and 13 hours on Friday, then 9.5, hours on Saturday, am I correct is stating that I should be paid regular time for the 8 hours Monday through Friday, Time and 1/2 for the 3.5 hours worked Monday through Thursday and Time and 1/2 for 4 hours on Friday, Double time Friday for 1 hour. Time and 1/2 for 8 hours on Saturday and Double time for 1.5 hours on Saturday?

  10. Joe says:

    I have a question I can't find anywhere. In California, does the OT after 40 hours include previously paid OT hours? To make it simple, here is my examples... Example A - If I work 8 hours on Mon, Tue, Thurs and Fri, and 8.5 hours on Wed. Would that be 40 hours of straight time and .5 hours OT or 39.5 straight time and 1 hour OT?

    By my reasoning at 4:30pm on Friday, I've hit the 40 hour mark and my last half hour is OT giving me .5 hours OT for Wed and .5 hours OT for Friday. Everyone I know disagrees with me, but that is the way the law is written.

  11. Joe:

    Your reasoning is correct. You would have 1 hour of OT.

  12. Bob Zurunkel says:

    Here's a tricky one for you that has me kind of stumped.

    Let's say "Joe" is a non-exempt salaried employee here in California working in the private sector whom, from time to time, must travel to other states to perform some service work for his company.

    As he is salaried, and lets say that salary is $50,000 per year, his hourly pay would then be $50,000/2080 hours Or $24.04 per hour.

    The employer, according to CA law, also pays out travel time @ the federal minimum wage.

    Now how would the overtime be calculated under the following scenario:

    1. Joe is normally scheduled to work 9 to 5 Monday thru Friday. He works his regular 8 hour shift Monday, Tuesday and Wednesday... 3 regular 8 hour shifts and 24 total hours of straight time worked.

    2. Thursday 6AM, Joe arrives at airport for an 8AM flight to Boston to work at a client’s office and waits for 2 hours prior to boarding at the gate. This is 2 travel hours and 26 hours of straight time worked for the week as travel time starts when Joe arrives at the airport and travel time is supposed to be considered as "hours worked".

    3. 6 hour flight to Boston from LA = 6 travel hours, 32 hours of straight time worked for the week.

    4. 2 hour driving to clients premises = Joe has already "worked" over 8 hours on Thursday, so this addition is 2 “overtime” travel hours, and 34 cumulative straight time hours total for the week.

    5. It's Thursday night and Joe decides to work at client’s premises for 3 hours doing his regular work = I assume this would be 3 hours of regular overtime for working more than 8 hours during the day. We are now at 37 straight hours for the week.

    6. Joe drives to nearby hotel and sleep for 8AM Friday start next day - 0 hours as sleep time is not considered for travel compensation.

    7. It's Friday and Joe works from 8AM to 8PM = 8AM to 11AM counts for the remaining 3 hours of regular time in his 40 hour straight time work week. All hours after that, 11AM to 8PM or 9 hours of overtime @ 1.5x and a total of 49 straight time hours worked.

    8. Drive to nearby hotel and sleep for 8AM Saturday start. 0 hours

    9. Work from 8AM to 10PM Saturday. 14 hours worked, 12 hours of overtime @ 1.5x + 2 hours of overtime at 2x and a total of 63 straight time hours worked for the entire work week.

    10. Drive to nearby hotel and sleep for 8AM start on Sunday. 0 hours

    11. Work from 8AM Sunday Morning until 2 PM Sunday Afternoon. 6 hours of regular overtime at 1.5x and a total of 69 straight time hours worked in the week.

    12. 2 hour drive back to airport. 2 hours of travel time over 40 hours @ 1.5x and 71 total straight hours worked.

    13. 2 hours waiting in the airport at the gate. 2 hours of travel "overtime", 73 total straight hours worked.

    14. 6 hour flight back to Los Angeles. 6 hours of travel "overtime" time and 79 total straight hours worked.

    15. Held up waiting for luggage for 1 hours. 1 hour of travel "overtime" and 80 total straight hours worked for the week.

    16. Driving home from airport. 0 Travel hours as the distance from home to the airport is the same as home to the work offices.

    Here's how I calculate it and please correct me if I'm wrong:

    80 total hours worked in the work week that break down as such:

    • Regular hours: 40 hours x $24.04 = $961.60
    • 1.5x Overtime: 30 hours x $36.06 = $1081.80
    • 2.0x Overtime: 2 hours @ $48.08 = $96.16
    • Regular Travel Hours @ $7.25 x 6 hours = $43.50
    • “Overtime” Travel Hours: 13 hours @ $7.25 x 1.5 = $141.38

    At face value, Joe has earned a total of $2324.44 for the work week; however, I'm confused about how to apply the weighted average.

    What I really need to determine is what the total overtime earned is, because the employer, despite it being against federal law, does not actually pay overtime, but allows "Joe" to take the equivalent of earned OT in Compensatory Time Off (CTO) at 1.5x the overtime hours worked.

    I'm figuring that if we can determine the proper value of OT earned using the weighted average rules, we can then calculate the proper amount of CTO time owed to "Joe" and at least he can take the correct amount of time off.

    Hope you can help!

  13. Bob Zurunkel says:

    If I followed your instructions correctly,

    I take the "base rate" of $24.04 and multiply by total hours worked at that rate(72) for a total of $1730.88. I then subtract 24.04 from the overtime rate of $36.06 and then multiply by 30 hours (12.02 x 30) for the 1.5x OT hours worked. Then, I subtract $24.04 from $48.08 and multiply by 2 hours (24.04 x 2)add those two together for a total of (360.60 and 96.16) $456.76... I then add that to the total of 1730.88 for a grand total of $2187.64

    So if I do the same with the travel time...

    Base rate of $7.25, and an OT rate of $10.88
    Total travel time of 19 hours so $7.25 x 19 = $137.75
    Subtract $7.25 from $10.88 = $3.63
    Multiply total OT hours worked (13 x 3.63) = $47.19
    Total travel time reimbursement of $184.94

    So the grand total for both comes to $2372.58

    Divide that by total hours worked (80): $29.66

    Regular weighted rate of $29.66
    OT weighted rate of $44.49
    Difference of $44.49 and $29.66 = $14.83

    So at this point what do I do...

    multiple the actual hourly rate by total hours and then add the weighted average overtime rate difference x 40 hours of combined OT
    ($24.04 x 80) + (40 x 14.83) = $2516.40?

    or

    multiply the weighted base rate x total hours and then add the 40 OT hours x the weighted average difference
    (29.66 x 80) + (40 x 14.83)= $2966?

    Ugh, SO CONFUSED!

  14. pc says:

    Let's say I'm a hourly employee and I get paid $30/hr for work and $15/hr for travel. The formula in the above example doesn't produce the results I expect when I work over 40 hrs. What is the correct way to calculate pay if I worked 42.5 hrs and traveled 25 hrs in one week.

  15. pc says:

    Let's assume I am a hourly employee and travel to Phoenix for work. Let's say I am paid $30/hr for work and $15/hr for travel. It takes me 10 hrs to get from my home to the hotel in Phoenix ( 10 hr travel time). Next morning I drive 0.5 hrs to work site A (0.5 hr travel time) arriving at 9am. I work until 11am (2 hr work). I then drive 1 hr to work site B take a 1/2 hr lunch break and arrive at work site B to start work at 12:30pm. I work until 4:30pm 9(4 hrs wk) and then drive 1 hr back to the hotel (1 hr travel). The question is what is the time between work site A and B - work or travel? Is the 1/2 lunch break on my own time or is it compensable?

    travel hrs previous day = 10
    work hrs = 6hrs, 7hrs or 7.5 hrs?
    travel hrs = 1.5 hr, 2.5 hrs, 3 hrs?

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