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# Set up and pay overtime based on different hourly rates

##### by Intuit• Updated 1 month ago

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

 Note: Not sure which payroll service you have? Here's how to find your payroll service.

### Scenario 1: Pay overtime based on the highest hourly rate for your employee

Great news!  There’s nothing extra you need to do. QuickBooks Online Payroll automatically calculates overtime based on the highest hourly rate.

You’ll add an overtime payroll item to your employee profile or paycheck just below the hourly payroll item with the highest hourly rate.

### Scenario 2: Pay overtime based on each hourly rate separately

You’ll have to manually calculate overtime for each lower hourly rate and set up other earnings items for overtime. You’ll add the dollar amounts on the other earnings items on paychecks.

You’ll add an overtime payroll item to your employee profile or paycheck just below each hourly payroll item. Add the overtime rates for each item.

### Scenario 3: Pay overtime based on the blended base rate

You’ll change the overtime base rate on the employee’s paycheck when you create payroll.

1. Go to Payroll, then Employees.
2. Select Run Payroll.
3. Select employees to pay. Then enter their pay details.
4. Select Actions then Edit paycheck.
5. Edit the Overtime Pay and Double Overtime Pay rate in the Rate column.
6. Select Save.
7. Select Preview payroll then Submit payroll.
8. Select Close.

You’ll add an overtime payroll item with the base rate you calculated in Step 1 to your employee profile or paycheck.

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