Weighted Average Overtime with Tip Credit

Labor Management supports calculating weighted average overtime rates for tipped employees who work under more than one pay rate. When the location uses tip credits to deduct from the minimum wage, Labor Management uses the minimum wage to calculate the total pay to establish the overtime rate, and then Labor Management deducts the amount owed for tip credits. For example, at a location configured with an overtime labor pay rule using 1.5 as the wage modifier and in a state with a $5.15 minimum wage, an employee might work the following two jobs and pay rates:
  • Bartender, $11 per hour, 7 hours

  • Server, $2.38 per hour, 35 hours

Without factoring overtime pay, the employee would earn $77 (11 x 7) for the bartending shifts and $83.30 (2.38 x 35) for the server shifts, for a total of $160.30. Because the employee worked two hours over the weekly threshold of 40 hours, Labor Management uses the following formulas to calculate overtime pay to account for the two overtime hours:
  • Total Pay / Total Hours = Weighted Average Rate

  • [Weighted Average Rate x (Wage Multiplier - 1)] = Overtime Rate

Labor Management enforces the state minimum wage and calculates (5.15 x 35) + (7 x 11) = $257.25 as the total pay, 257.25 / 42 = $6.12 as the weighted average rate, and [6.12 x (1.5 - 1)] = $3.06 as the overtime rate. Multiply the overtime rate by the number of overtime hours worked to determine the overtime pay: 3.06 x 2 = $6.12.

Deduct the tip credit amount from the total pay as shown in the following formula:

Total Pay + Overtime Pay - Tip Credit = Amount Owed