Some states, such as California and New Jersey, do not calculate overtime based on whether the employee works more than a given hours-per-day, week, or pay period threshold. These states require Weight Average Rate (WAR) calculations:
If an employee works under more than one pay rate, overtime pay is determined by the average pay rate.
If an employee works under one pay rate, overtime pay is determined by the standard pay rate.
For example, Chris works 10 hours as a bartender at 10$ an hour and 32 hours as a cook at $12 hours, for a total of 42 hours in the week. Without counting overtime hours, Chris receives $100.00 for his bartending shifts ($10 x 10 = $100) and $384.00 for his kitchen shifts ($12 x 32 = $384), for a total of $484.00 for the week. The system then calculates the amount owed for the two overtime hours by using the following formula:
WAR x (wage multiplier - 1) = overtime wage
In this example, the overtime wage multiplier is 1.5 times his pay rate. To calculate the WAR, divide the total pay by the total number of hours worked (Total Pay / Total Hours).
[$484.00 / 42] x (1.5 - 1) = $5.76
You can now multiply the wage by the number of hours worked, resulting in $5.76 x 2 = $11.52.
Parent topic: Payroll Preprocessing Administration