What's covered in this guide?
What is weighted average overtime?
Under the Fair Labor Standards Act (FLSA), when an employee works at two or more different pay rates in a single workweek and earns overtime, the overtime premium must be calculated using a weighted average of all rates worked — not just the rate the employee was working when the overtime hours occurred.
This is commonly called blended overtime or weighted average overtime.
For example, an employee works 25 hours at $15/hour and 20 hours at $20/hour in the same week. Their overtime pay is not simply 1.5x one of those rates. Instead, the overtime premium is based on the weighted average of both rates across all 45 hours worked.
For more information on FLSA overtime requirements, see the U.S. Department of Labor Wage and Hour Division website.
How the weighted average rate is calculated
The weighted average rate (also called the regular rate of pay) is calculated as:
Regular Rate = Total Straight-Time Earnings / Total Hours Worked
The overtime premium is then:
Overtime Premium = Overtime Hours x Regular Rate x (Multiplier - 1)
For example, with a 1.5x overtime multiplier:
Employee works 25 hours at $15/hour = $375
Employee works 20 hours at $20/hour = $400
Total straight-time earnings = $775
Total hours = 45
Regular rate = $775 / 45 = $17.22
Overtime hours = 5 (hours over 40)
The employee has already been paid straight time for all 45 hours ($775)
Overtime premium = 5 hours x $17.22 x 0.5 = $43.06
Total pay = $775 + $43.06 = $818.06
Note that the multiplier minus 1 (e.g., 0.5 for time-and-a-half) is used because the employee has already been paid at their straight-time rate for those hours. The overtime premium is only the additional amount owed on top.
Non-discretionary bonuses and certain allowances that are part of the employee's regular compensation must also be included when calculating the regular rate. See the Department of Labor fact sheet for more information on what should be included in regular rate of pay.
How to set up weighted average overtime rules in Workforce
Step 1: Create an overtime award rule with weighted average overtime
To set up a weighted average overtime rule, you need to create (or edit) an earnings rule that uses the Weighted Average Overtime rate option.
Navigate to Time & Schedules > Compliance > Custom Earnings Rules
Create a new rule or edit an existing overtime rule
Configure the rule's conditions as you normally would (e.g., hours over 40 in a week)
In the Rate section of the rule, you will see three options for how to pay the overtime:
Multiplier — A fixed multiplier of the employee's base hourly rate (e.g., 1.5x)
Specific cost — A fixed dollar amount per hour
Weighted Average Overtime — Calculates overtime using the weighted average rate
Select Weighted Average Overtime
Enter the overtime multiplier (e.g., 1.5 for time-and-a-half, 2.0 for double time). The multiplier must be greater than 1
Save the rule
When this rule triggers on a timesheet, Workforce will calculate the regular rate of pay across all hours worked in the overtime period and apply the premium accordingly.
Step 2: Mark tips & others to be included in the weighted average
Under the FLSA, non-discretionary bonuses and certain earnings must be factored into the regular rate of pay when calculating overtime. If you have earnings rules that should be included in the weighted average calculation, you need to mark them.
Navigate to Time & Schedules > Compliance > Tips and Others
Open the earnings rule you want to include
In Step 2 (the payroll linking section), find the checkbox labeled Include in weighted average overtime calculation
Check the box
Save the rule
When this box is checked, the cost of this earnings will be added to the employee's total straight-time earnings before dividing by total hours to determine the regular rate.
Note: An earnings rule cannot be marked as both Include in weighted average overtime calculation and Regular rate of pay — these options are mutually exclusive.
Step 3: Verify payroll earnings rate configuration
When a weighted average overtime award rule is imported into Payroll as an earnings rate, you need to ensure the earnings rate is correctly configured.
Navigate to Payroll > Payroll Settings > Earnings Rates
Find the earnings rate that corresponds to your weighted average overtime rule
Verify the following settings:
The Blended overtime checkbox is checked under the additional options
The Multiplier matches the compliance rule
The Wage Type is set to Overtime
The Blended overtime checkbox tells the payroll system to calculate this earnings rate using the weighted average method rather than a simple multiplier. Without this checkbox, the earnings rate would use a standard fixed multiplier against the employee's base rate.
How weighted average overtime appears on pay stubs
When a pay run is processed with weighted average overtime, the overtime appears as a single Overtime Hours line on the employee's pay stub. This line includes both the straight-time value of the overtime hours and the overtime premium combined into one amount.
The pay stub line shows a rate, hours, and multiplier:
Hours — The total overtime hours worked
Multiplier — The overtime multiplier from the earnings rate (e.g., 1.5x)
Rate — A derived number calculated by dividing the total blended overtime cost by the hours and multiplier
Because the rate is derived from the weighted average — not from any single hourly rate the employee actually worked at — it may not look like a number you immediately recognize. This is expected. The rate represents the weighted average rate adjusted so that when it is multiplied by the hours and the multiplier, the result equals the correct total blended overtime amount.
Example:
An employee works two jobs in the same week:
Job A: 30 hours at $15/hour = $450
Job B: 15 hours at $25/hour = $375
Total: 45 hours, 5 hours overtime at 1.5x (3 OT hours on Job A, 2 OT hours on Job B)
Regular rate: $825 / 45 = $18.33
Overtime cost by job:
Job A overtime:
Straight-time: 3 hours x $15 = $45.00
Premium: 3 hours x $18.33 x 0.5 = $27.50
Total: $72.50
Job B overtime:
Straight-time: 2 hours x $25 = $50.00
Premium: 2 hours x $18.33 x 0.5 = $18.33
Total: $68.33
What appears on the pay stub — two Overtime Hours lines:
Line | Rate | Hours | Multiplier | Total |
OT - Job A | $16.11 | 3 | 1.5x | $72.50 |
OT - Job B | $22.78 | 2 | 1.5x | $68.33 |
The rate on the Job A line ($16.11) doesn't match Job A's base rate ($15), and the rate on the Job B line ($22.78) doesn't match Job B's base rate ($25). Neither matches the regular rate ($18.33). Each derived rate is a blend of that job's base rate and the weighted average premium, back-calculated so that rate x hours x multiplier equals the correct total for that line.
How overtime premium appears on the W-2
Starting with 2026 W-2s, the overtime premium is reported separately on the employee's W-2 in Box 12 with the code TT. This shows only the premium portion of overtime pay — not the full overtime earnings amount.
Frequently Asked Questions
What earnings should be included in the regular rate of pay?
Under the FLSA, the regular rate of pay must include all compensation for employment, with certain specific exceptions. Generally, the following should be included:
Base hourly wages at all rates worked during the week
Non-discretionary bonuses (e.g., production bonuses, attendance bonuses, shift differentials)
Commissions
The following are generally excluded from the regular rate:
Discretionary bonuses (e.g., holiday bonuses at the employer's discretion)
Gifts and payments made as a reward for service not tied to hours, production, or efficiency
Payments for time not worked (e.g., vacation pay, holiday pay, sick pay)
Employer contributions to benefit plans (health insurance, retirement)
Premium pay for work on weekends or holidays (if paid at a premium rate as a matter of agreement, not because of overtime)
In Workforce, use the Include in weighted average overtime calculation checkbox on an earnings rule to include it in the regular rate. See the Department of Labor fact sheet for more information on what should be included in regular rate of pay.
What happens if my overtime week spans two pay periods?
The system uses your configured workweek start day to determine overtime periods. If a workweek crosses a pay period boundary (e.g., your workweek runs Monday–Sunday but your pay period ends on Friday), Workforce will look back at the prior timesheet to pull in hours from earlier in that workweek.
This means the regular rate of pay is always calculated using the full workweek's hours and earnings, even when a timesheet only covers part of the week.
Important Note: Workforce does not automatically adjust prior pay periods if the regular rate of pay for the prior timesheet is adjusted by the current timesheet.
Can I change the day my overtime workweek starts?
Yes. Navigate to your organization's settings and update the overtime start day. The overtime workweek always runs for 7 consecutive days beginning on the configured start day. Under the FLSA, employers may choose any day and time to begin their workweek, but it must be a fixed and regularly recurring period of 168 hours (7 consecutive 24-hour periods).
Can I have both regular overtime and weighted average overtime rules?
Yes. You can have some overtime rules that use a standard multiplier and others that use weighted average overtime. For example, you might have a daily overtime rule that pays 1.5x the employee's base hourly rate (standard multiplier) and a weekly overtime rule that uses the weighted average rate. Each rule is calculated independently — the standard multiplier rule uses the employee's base rate, while the weighted average rule calculates the regular rate across all hours in the period.
What happens if a bonus is paid mid-week that should be included in overtime?
If you add a bonus with Include in weighted average overtime calculation checked to a shift in the middle of a workweek, the regular rate of pay will be recalculated for the entire workweek. This means the overtime premium for every overtime hour in that week will update to reflect the allowance.