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Blended Overtime Rate in Hospitality

HR knows that employers must pay an overtime premium of 1.5 times base pay to non-exempt employees who work in excess of 40 hours in a workweek. This calculation is complicated in the hospitality industry due to the use of the common utilization of the tip credit to the federal minimum wage and prevalence of multi-job employees.

Many hoteliers have employees that operate in two or more job functions. This could an employee who is a housekeeper during the first shift and a maintenance technician in the second shift, for example. In the hospitality industry, all hours worked for the same employer, which is defined as the management company and not simply the specific hotel property, must be added together to determine if total hours work exceed 40 hours in the workweek.

If the base rates of the two or more jobs are the same, the overtime calculation is straight forward it is simply 1.5 times the base rate. If the base rates of the two or more jobs are different, then the employer needs to blend the base rates to recreate a new regular rate of play before applying the 1.5 overtime multiplier.

Here is an example of calculating the blended overtime rate for an employee who works in two jobs at two different hourly rates.

Job 1: Housekeeper: $12.50 per hour

Job 2: Maintenance Tech: $16.50 per hour

For the week in question, this employee worked 25 hours as a housekeeper and 20 hours as a Maintenance Tech. With 45 total hours in the week, this employee is eligible for 5 hours of overtime premium pay. What question is how do we calculate the blended regular rate of pay and arrive at the weekly total earnings?

Housekeeper  = $12.50/hr x 25 Hours = $312.50 straight-time earnings

Maintenance Tech  = $16.50/hr x 20 Hours = $330.00 straight-time earnings

$312.50 + $330.00 = $642.50 total straight-time earnings

$642.50 total earnings / 45 hours for the week = $14.28 blended regular rate of pay

Remember, the straight-time earnings have already been calculated for all hours worked, so the additional amount to be calculated for each overtime hour worked is one –half the regular rate.

$14.28 regular rate x 0.5 half x 5 overtime hours  = $35.70 additional half-time pay

Adding the straight-time earnings with the additional half-time pay comes out to our total pay with overtime premium.

$642.50 + $35.70 = 678.20 total pay with overtime

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This entry was posted on Thursday, November 21st, 2013 at 11:59 AM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.