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Weighted Overtime

Weighted Overtime is a calculation method used to determine overtime (OT) pay for employees who receive varying pay rates during a work week. This is a calculation within the system that must first be configured by Empeon Customer Support before it can be reflected in payroll. To have Empeon Workforce calculate weighted OT, please submit the Custom Services Request Form. This calculation helps employers ensure that their OT payouts are applied correctly, per IRS guidelines.

The steps below outline how the Weighted OT calculation is applied.

Scenario: To help illustrate the steps in how this calculation applies, we'll use an example of an employee who worked a total of 60 hours within a work week and has a regular rate of $22.08. Over the course of those 60 hours, this employee also works nights and weekends that apply shift differential hours adding additional hourly pay when worked.

  • Weekend Shift Differential (All Weekend Hours): 24 hours qualified for this shift differential at an extra $2.50 per hour.
  • Night Shift Differential (6pm - 6am): All 60 hours qualified for this shift differential at an extra $2.00 per hour.

Part 1 - Calculate Total Earning Amount for the Week

With this scenario in mind, the first step toward calculating the weighted OT is to total all the earnings amounts accumulated for the work week.

  • Worked Regular: 40 hours X $22.08 = $883.20
  • Worked Overtime: 20 hours X $22.08 = $441.60
  • Weekend Shift Differential: 24 hours X $2.50 = $60.00
  • Night Shift Differential: 60 hours X $2.00 = $120.00

Total Earnings = $1,504.80 ($883.20 + $441.60 + $60.00 + $120.00).

Part 2 - Calculate Weighted Hourly Rate

The Total Earnings amount in Part 1 is then divided by the Total Hours Worked (both Regular and Overtime) to determine the Weighted Hourly Rate. 

Please Note: Only earnings representing a "worked hour" should be included in Hours Worked.

Weighted Hourly Rate = Total Earnings ÷ Hours Worked ($1,504.80 ÷ 60)

Weighted Hourly Rate = $25.08 per hour

Part 3 - Calculate Weighted Overtime Premium Rate

Overtime Pay is applied to every worked hour beyond 40 hours in a work week. It is typically paid out at 1.5 times the Weighted Hourly Rate. In Empeon's Weighted Overtime calculation, overtime (OT) is applied across two separate Earning Codes representing:

  • Overtime: The calculation of the Regular Rate x Hours Worked over 40 hours.
  • Overtime Premium: Represents the additional half-time rate applied to the overtime hours.

With the Weighted Hourly Rate of $25.08 calculated in Step 2, Empeon Workforce multiplies this by 0.5 to get the Weighted Overtime Premium Rate.

Weighted Overtime Premium Rate = Weighted Hourly Rate × 0.5 ($25.08 × 0.5)

Weighted Overtime Premium Rate = $12.54

Part 4 - Calculate Overtime Premium Pay

Now that the Weighted Overtime Premium Rate is determined, Empeon Workforce will then multiply the Overtime Hours Worked (20) by the Weighted Overtime Premium Rate ($12.54).

Overtime Premium Pay = Weighted Overtime Premium Rate × Overtime Hours Worked ($12.54 × 20)

Overtime Premium Pay = $250.80 

Part 5 - Calculate Total Gross Pay

The final step of the calculation is adding the Total Earnings from Part 1 to the Overtime Premium Pay of Part 4 which is ultimately applied to the employee's gross pay.

Total Gross Pay = Total Earnings + Overtime Premium Pay ($1,504.80 + $250.80)

Total Gross Pay = $1,755.60

Reviewing and Managing Empeon's Weighted Overtime Calculation

The Overtime Premium Pay calculated in Part 4 is identified on the employee's pay records within the "Show Details" section of an employee's paycheck in Pay Entry. Here is where it can be confirmed that the weighted OT premium amount is being applied to the employee's gross. The exact earning code used for Overtime Premium can vary, but the most common codes used for Empeon clients is "OTPR" or "OTPrem".

Applied within the Weighted OT calculation that Empeon sets up are two Code Groups that include the earnings that count toward weighted OT. This is important to note when new Earning Codes are added that may need to be included within the weighted OT calculation. For every company that has the Weighted OT calculation set up, there will be Code Groups set up for Weighted Dollars (WeightedDo) and another for Weighted Hours (WeightedHo).

All earnings that should be included in the Weighted OT calculations should be included in the Weighted Dollars Code Group, while earning codes that only represent hours worked should be included in the Weighted Hours Code Group. For assistance with maintaining these Code Groups when new Earning Codes are added, please contact Empeon Customer Support.