How to Calculate Blended Overtime Pay

What is overtime pay?

Overtime pay is any money paid to employees for hours worked beyond their regular hours. According to a federal law known as the Fair Labor Standards Act (FLSA), employees must be paid overtime for all hours worked over 40 in a week. However, some types of employees are exempt from FLSA’s overtime provisions due to their role within the company.

An employee’s overtime pay rate must be at least 1.5 times their standard wage. For example, an employee earning $15 per hour would be paid $22.50 per hour for the overtime hours worked. 

Notably, you can mandate your employees to work overtime. In other words, it’s not illegal (although it may be frowned upon) to fire employees who refuse to work overtime after you demand it. However, if you do demand overtime work, you must pay nonexempt employees at overtime rates. Overtime pay should be included in the employee’s paycheck for the pay period during which they worked overtime.

What is a blended rate in overtime?

A blended overtime rate, also known as blended overtime pay, is calculated when an employee earns different pay rates for various roles or tasks within the same workweek. The blended rate is the weighted average of all the employee’s non-overtime wages and must be multiplied by 1.5 to determine the overtime pay rate.

Ed Hones, an attorney at Hones Law Employment, explained that blended overtime applies when employees work multiple jobs or have different pay rates for the same employer during a single workweek. “[Blended overtime pay] ensures they are fairly compensated for overtime hours based on their average hourly rate across all jobs,” Hones said. 

Businesses neglect blended overtime rules to their peril. “Blended overtime is federally required under the Fair Labor Standards Act, though some states may have additional rules,” Hones noted. “Many employers overlook this nuance, especially in industries like retail or hospitality, where workers often juggle multiple roles.”

Justin Schnitzer, an employment attorney at FEDELAW, also emphasized the importance of adhering to proper blended overtime pay calculations. “Failing to properly calculate blended overtime can lead to significant back pay liability, penalties and potential FLSA violations,” Schnitzer cautioned. “Employers can get this wrong by paying the overtime at the rate of one of the employee’s jobs when the overtime rate must take into account all of the rates at which the employee worked that week. This mistake can trigger DOL [United States Department of Labor] investigations and employee claims. The statute of limitations allows claims going back two years.”

How to calculate blended overtime rates

When calculating blended overtime pay, employers must first determine the employee’s “regular rate of pay” — the weighted average of all their hourly rates for the week. “For example, if an employee splits their time between a $15 per hour role and a $20 per hour role, their ‘regular rate of pay’ for overtime is calculated by dividing their total weekly earnings by total hours worked,” Hones explained. “This ensures the overtime pay reflects their actual blended earning rate rather than a flat figure.”

The blended regular rate formula is as follows:

Blended regular rate = (h1 x w1 + h2 x w2 + h3 x w3) / (h1 + h2 + h3)

The overtime pay rate is then calculated as:

Overtime pay rate = Blended regular rate x 1.5

In the above equation, the variables represent the following values:

• h1 = number of hours worked in first role
• h2 = number of hours worked in second role
• h3 = number of hours worked in third role
• w1 = standard wages for work in first role
• w2 = standard wages for work in second role
• w3 = standard wages for work in third role

If the employee works in four different roles, you can add an “h4 x w4” term to the numerator and an “h4” term to the denominator. The formula remains consistent, regardless of how many roles the employee works. 

Julia Yurchak, a talent sourcing and acquisition management specialist at Keller Executive Search, emphasized the need for precision when calculating blended overtime rates. “My advice is to double-check your calculations, keep detailed records and when in doubt, consult with an employment law attorney,” Yurchak advised. “Your payroll system should be able to handle blended overtime, but it’s worth verifying the math periodically to ensure everything is running correctly.”

Examples of blended overtime pay

Below are three examples of blended overtime pay.

Two different pay rates

This employee earns $20 per hour for onsite construction tasks and $30 per hour for offsite tasks. Suppose they worked 45 hours during the week in question — 30 onsite and 15 offsite. This is five hours of overtime. Let’s calculate their blended overtime pay and total wages:

Step 1: Calculate the blended regular rate of pay:

Blended regular rate = (h1 x w1 + h2 x w2) / (h1 + h2) 

                                    = (30 x 20 + 15 x 30) / (30 + 15)

                                    = 600 + 450 / 45 = 23.33

The blended regular rate is $23.33 per hour.

Step 2: Calculate the overtime pay rate:

Overtime pay rate = Blended regular rate x 1.5

                                 = 23.33 x 1.5 = 35 

The overtime pay rate is $35 per hour.

Step 3: Calculate the overtime pay for 5 hours:

Overtime pay = 5 x 35 = $175

The overtime pay is $175.

Step 4: Calculate the standard pay:

Standard pay = (h1 x w1) + (h2 x w2)

                        = (30 x 20) + (15 x 30)

                        = 600 + 450 =1,050

The standard pay is $1,050.

Step 5: Calculate the total weekly pay:

Total weekly pay = Standard pay + Overtime pay

                              = 1050 + 175 = 1,225

Total weekly pay is $1,225.

Three different pay rates

This employee earns $15 per hour for disinfecting, $20 per hour for deep cleaning and $25 per hour for sanitation work. During a week when this employee spends five hours disinfecting, 20 hours deep cleaning and 17 hours on sanitation, they also work two overtime hours. Here’s how to calculate their blended pay and total wages:

Step 1: Calculate the blended regular rate of pay:

Blended regular rate = (h1​ x w1​) + (h2​ x w2​) + (h3​ x w3​)​ / (h1 + h2 + h3)

                                    = (5 x 15) + (20 x 20) + (17 x 25)​ / 5 + 20 + 17

                                    = 75 + 400 + 425​ / 42 = 21.43

The blended regular rate is $21.43 per hour.

Step 2: Calculate the overtime pay rate:

Overtime pay rate = Blended regular rate x 1.5

                                    = 21.43 x 1.5 = 32.15 

The overtime pay rate is $32.15 per hour.

Step 3: Calculate the overtime pay for 2 hours:

Overtime pay = 2 x 32.15 = 64.30

The overtime pay is $64.30.

Step 4: Calculate the standard pay:

Standard pay = (h1​ x w1​) + (h2 x w2​) + (h3 x w3​) 

                                   =(5 x 15) + (20 x 20) + (17 x 25)

                                   = 75 + 400 + 425 = 900

The standard pay is $900.

Step 5: Calculate the total weekly pay:

Total weekly pay = Standard pay + Overtime pay

                                   = 900 + 64.30 = 964.30

Total weekly pay is $964.30

Four different pay rates

This employee performed four distinct jobs at four different pay rates and worked 12 hours at each job during the week. Their total hours worked were 48, which entitles them to overtime. Their pay rates were:

Job 1: $20 per hour

Job 2: $22.50 per hour

Job 3: $25 per hour

Job 4: $30 per hour

Here’s how to calculate their blended pay and total wages:

Step 1: Calculate the blended regular rate of pay:

Blended regular rate = (h1 x w1​) + (h2​ x w2​) + (h3​ x w3​) + (h4​ x w4​)​ / (h1 + h2 + h3 + h4)

                                    = (12 x 20) + (12 x 22.50) + (12 x 25) + (12 x 30) / (12 + 12 + 12 + 12)

                                    = 240 + 270 + 300 + 360 / 48

                                    = 1,170 / 48 = 24.38

The blended regular rate is $24.38 per hour.

Step 2: Calculate the overtime pay rate:

Overtime pay rate = Blended regular rate x 1.5 

                                    = 24.38 x 1.5 = 36.57 

The overtime pay rate is $36.57 per hour.

Step 3: Calculate the overtime pay for 8 hours:

Overtime pay = 8 x 36.57 = 292.56

The overtime pay is $292.56.

Step 4: Calculate the standard pay:

Standard pay = (h1​ x w1​) + (h2 x w2​) + (h3​ x w3​) + (h4 x w4​)

                        = (12 x 20) + (12 x 22.50) + (12 x 25) + (12 x 30)

                        = 240 + 270 + 300 + 360 = 1,170

The standard pay is $1,170.

Step 5: Calculate the total weekly pay:

Total pay = Standard pay + Overtime pay

                 = 1,170 + 292.56 = 1,462.56

Total weekly pay is $1,462.56.

When is a blended rate required?

A blended rate is required anytime an employee who earns different wages for different roles works overtime in any of these roles. Importantly, an employee who works 35 hours in one role and six hours in another during one week still earns overtime pay. Although this employee worked less than 40 hours per role, the combined total of 41 hours exceeds the FLSA’s 40-hour threshold. That sum is what the FLSA uses to determine whether blended overtime pay is required.

Blended overtime pay is common in industries where regulations or union agreements result in employees earning different wages for different types of work. These variable wages are particularly common in the construction industry.

What is a shift differential?

A shift differential is extra pay given to employees for working long shifts or less desirable hours, such as nights, weekends or holidays. It’s meant to encourage workers to accept these shifts by offering a small increase in their hourly rate.

A shift differential differs from overtime pay, which is federally required for nonexempt employees who work more than 40 hours a week. Overtime is calculated as time-and-a-half — 1.5 times the employee’s regular hourly rate. For example, someone earning $20 per hour would get $30 per hour for overtime hours.

In contrast, shift differentials are up to the employer and apply regardless of total hours worked. For example, if your job pays $20 per hour with a $2 per hour night shift differential, you’d earn $22 per hour for night shifts, even if you haven’t hit 40 hours that week.

Both overtime pay and shift differentials help businesses keep operations running smoothly by incentivizing employees to work longer or less convenient hours while maintaining a positive work-life balance.

Jennifer Dublino contributed to this article.