Blog Post

When to Use Weighted Average Overtime (WAOT)

Published on

August 2, 2022

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Brandi Clymer

We know there are many rules surrounding employee pay and especially around overtime. The key rule for hourly employees is that if they work over 40 hours in a week get paid at 1.5 times their normal hourly rate for the hours over 40.  There are some additional overtime rules you should consider. The Fair Labor Standards Act (FLSA) is where these rules are based that get nonexempt employees overtime pay when they work extra hours. 

Most employers are subject to FLSA but note there are some rare exceptions of companies that are not subject to FLSA, so double-check that FLSA applies to your company.

Another key thing to consider is if your state has special overtime rules. There are several states that have more stringent rules on Overtime, such as California, Alaska, and Nevada. They all have rules about daily overtime once an employee works more than 8 hours per day. Colorado also has daily overtime rules, but they are not until the employee works more than 12 hours a day. And in Oregon, there is a daily overtime rule for manufacturers for more than 10 hours a day.

When you look at FLSA there are some additional details that if an employee gets paid at different rates of pay or has flat earnings, both should be considered when calculating the employee's overtime rate of pay. When you include the different rates of pay and flat earnings this calculation is called Weighted Average Overtime (WAOT) and below is an example using Scissortail Time & Labor Management (TLM) for the calculations.

Scissortail does a great job of handling FLSA WAOT. Here is an example of a timesheet from Scissortail where you can see the employee worked 4 different jobs that all get different pay rates. In addition, he also got a $100 Bonus this week. 

On his timesheet, if I go to the Counters tab, I can see the different rates of pay for the different jobs the employee works. I can also see the result of the WAOT calculation in the Overtime line. Note: if he earned overtime only for the hours on that day at $27 * 1.5 = $40.50. But because he worked many lower-paying jobs his overtime rate was only $39.33. 

Here is an Excel spreadsheet where I was able to verify WAOT was calculated correctly in Scissortail. 

We find that many clients handle overtime using the normal rules of time over 40 hours a week, but do not consider the special rules around including flat earnings and multiple rates of pay when calculating their overtime rates. If you are concerned you might need to change the way you are calculating overtime, contact us at support@cs3tech.com to discuss your concerns with one of our consultants.

For more information about this topic, here is a link to a fact sheet from the US Wage & Hour Division of the Department of Labor - https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs23.pdf

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