Run payroll with multiple pay rates (more than one hourly rate)

If your employee is set up with multiple pay rates, follow these steps on how to enter each rate when running payroll.

Step 1. Enter regular hours

When you create a paycheck for an employee, enter the hours worked at each rate and enter any overtime or double overtime hours. By default, our payroll service bases overtime and double overtime calculations on the employee's highest pay rate for the pay period.

For example, if you enter 30 hours worked at a Regular Pay rate of $10 an hour, 10 hours worked at an Hourly 2 rate of $12 an hour, and 10 hours overtime, we calculate gross wages of $600.00.

(30 x $10) + (10 x $12) + (10 x ($12 x 1.5)) = $600.00

Note: If you accept the higher rate for overtime calculations, you do NOT need to read the rest of this document.

Step 2. Enter overtime hours

The easiest method of calculating the overtime rate is simply to accept the default, which is the highest of the rates you're paying the employee during the pay period. our payroll service always calculates overtime pay at 1.5 times the overtime and double overtime base rate and calculates double overtime pay at 2 times the overtime and double overtime base rate.

Applying a different overtime and double overtime base rate. Nevertheless, there are several other legal ways to calculate the base rate. Some companies must comply with union contracts requiring more complicated methods, such as using an overtime rate based on type of work or using a weighted average.

Determining overtime rate based on type of work performed.To determine an overtime rate based on the type of work performed, you must track the pay rate for each of the overtime hours worked and calculate a blended base pay rate.

The formula for blending two hourly rates is:

For example, suppose John worked the following hours last week:

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

Entering hours and changing the OT and Double OT Base Rate. Follow these steps to change the OT and Double OT base rate when you create a paycheck for the employee.

1. Click the Payday tab
2. Click the Check Details icon next to the employee's name.
3. Enter the hours worked for each pay rate. The total must be 40 or fewer hours per week.
4. Enter the Overtime and Double Overtime hours.
5. Enter the OT and Double OT base rate you calculated.
   
   
6. After you finish filling out the rest of the items, click Create to return to the Create Paychecks page to finish the rest of the payroll.

Step 3. Enter paid time off hours

 When you enter more than one pay rate for an employee, our payroll service uses the:

• Regular pay rate to calculate Sick Pay and Vacation Pay.
• Highest pay rate when calculating overtime and double overtime (unless you change the OT and Double OT base rate as described in Paying overtime and double overtime).