Learn how to set up overtime rates for your employees paid two different hourly rates in QuickBooks Online Payroll and QuickBooks Desktop Payroll.
If you have employees paid at two or more hourly rates, you can set up these rates in your payroll account. You can also control the rate used to calculate overtime and double overtime based on different hourly rates. We'll show you how.
Step 1: Determine your overtime situation
You may be able to pay overtime to your employees based on their highest regular hourly rate.
However, some businesses are required to follow union contracts that have more complicated methods. You may be required to calculate overtime based on each hourly rate separately, or use a base rate (blended overtime rate).
Calculate the base rate for your employee (if applicable)
Here's the formula to get the base rate (blend two hourly rates):
(Overtime Regular Hours x Regular Pay Rate) + (Overtime Hourly 2 Hours x Hourly 2 Rate)
(Overtime Regular Hours) + (Overtime Hourly 2 Hours)
= Base Rate
For example, suppose John worked the following hours last week:
Regular Pay Rate ($12): Regular hrs — 28, Overtime hrs. — 8
Hourly2 Rate ($10): Regular hrs — 12, Overtime hrs. — 2
The blended rate to enter for OT and Double OT Base Rate is $11.60: (8 x $12) + (2 x $10) / (8 + 2) = $11.60
For this Base Rate, gross wages are $630.00: (28 x $12) + (12 x $10) + (10 x $11.60 x 1.5) = $630.00
Step 2: Set up overtime based on your situation
Select your product below.
|Note: Not sure which payroll service you have? Here's how to find your payroll service.|