What are Blended Rates?
What are Blended Rates?The federal government’s Fair Labor Standards Act requires that when work is performed at two or more rates, overtime must be paid out at a blended rate. A “blended rate” is a rate of not less than one-and-a-half times the weighted average of all non-overtime rates used during that workweek.
When is a Blended Rate Required?
For most employers, calculating overtime is straightforward. Employees would receive one-and-a-half times their regular rate of pay for all hours worked over 40. However, calculating overtime becomes more complicated for employees that work various jobs at different rates.
How to Calculate Blended Overtime Pay Rates:
Example
You own a building service contracting company and your employee(s) perform a variety of duties at the following rates:
Your employee acts as a supervisor at $20 per hour, washes floors at $15 per hour, and empties trash at $10 per hour. When an employee works over 40 hours in a week, how do you calculate their overtime rate?
Let’s assume the employee supervised for 20 hours, washed floors for 20 hours, and emptied trash for 10 hours in a workweek. The blended rate would be determined by the following equation:
20 hours X $20 + 20 hours X $15 +10 hours X $10 = $800; $800/50 total hours = $16 per hour
Therefore, $16 per hour is the blended rate. The premium pay for overtime is then half of $16, $8, multiplied by the 10 overtime hours for a total of $80. Total compensation would be $880 for this week.
Using the blended rate, the overtime rate may change as the total hours worked in a week change. For instance, if the employee worked 5 hours supervising, 25 hours washing floors, and 20 hours emptying trash, the blended rate per hour would be $13.50.
Employers must calculate this every single week for each employee who performs work at different rates. All rates must be over minimum wage and the regular rate must include any other compensation, such as bonuses, cost-of-living adjustments, and the like. (Read more details on the requirements here.)
Automating Blended Overtime Pay Rates
Calculating blended overtime rates manually can be cumbersome. To avoid making errors and wasting time, an time and attendance system can be a solution to ensure that you pay employees the correct rate at the right time. Look for an advanced time and attendance system that has the ability to calculate blended rates for your employees that work overtime and have worked at different pay rates during the pay period.
Ensure that your time and attendance system will allow you to:
- Have instant access to your employees's timesheets.
- Add and remove tasks and rates based on each employee.
- Specify the group of employees that will be paid based on blended rate.
- Specify which rate types would participate in the blended rate calculation.
- Process the blended rate, based on hours worked and applicable regular pay, and use that to decide the final pay of employee.
- Display blended rates on the screen and in printed reports and exports.
Want to learn more about how EPAY's time and attendance system, Blueforce, can help you calculate blended overtime rate (as well as multiple locations, job assignments, job types, shift differentials and union rules)? Contact us!