Weighted average overtime (WAOT) calculation

Alerts and notices
Leave feedback

Internal Employees: Submit feedback

Contact information (optional):

Leave this blank:

Please tell us how we can make this information more helpful.


Characters left:

Change to CS Support service hours

Our Support department is closed on Friday, April 28th for a company event. However, limited Accounting CS phone support is available on that date from 9 AM - 5 PM ET due to the approaching deadline for quarterly payroll tax forms.

Links to our most popular payroll tax processing topics are available in the Alerts and notices section on the right side of most pages.

Introduction

Overtime payments are generally calculated at one and a half (1.5) times the employee's regular rate of pay for all hours worked beyond 40 hours in a week. For a variety of reasons, a client may want to calculate overtime payments using the weighted average method instead. Some scenarios include:

Top of page

Setting up WAOT pay items for a client

To use the weighted average overtime calculation for an employee, you need to set up one of the client's pay items as special type Weighted Average Overtime.

Follow the instructions for creating and adding payroll items for your client as usual. In the Special Type section, select Weighted Average Overtime.

You may also need to set up a pay item as special type Premium Wages, such as in the case of an employee who receives a shift premium. For an example of this, see the section covering employees who receive a shift premium.

Top of page

Setting up an employee to use a WAOT pay item

To calculate an employee's overtime using the weighted average method, you must set up the employee to use a pay item assigned as special type Weighted Average Overtime.

Follow the instructions for adding payroll items to an employee record as usual. The pay item that you mark as active for the employee must be set up as special type Weighted Average Overtime.

Top of page

Excluding pay items from WAOT calculations

If an employee has an active pay item set up as special type Weighted Average Overtime, all other pay items active for the employee will also be subject to WAOT calculation. However, you can exclude pay items individually from the WAOT calculation.

  1. Choose Setup > Payroll Items and click the Main tab.
  2. Select the payroll item that you want to exclude and click the Edit button.
  3. In the Exclusions section, mark the Weighted average overtime calculation checkbox.
  4. Click the Enter button to save the change.

Top of page

Setting up a shift-premium employee to use the WAOT calculation

In some situations, an employer may want to include the dollar amount associated with a pay item in the weighted average overtime calculation, but not want to include the hours associated with the pay item. An example of this would be if an employee is paid a shift premium. You can set up the employee as follows.

  1. Follow the instructions for creating and adding payroll items for your client as usual to add a new shift premium pay item. In the Special Type section, select Premium Wages.
  2. Follow the instructions for adding payroll items to an employee record as usual, and in the Payroll Items tab of the Employees screen, mark as active both the pay item set up as special type Weighted Average Overtime and the pay item set up as special type Premium Wages.
  3. In the Rate column, enter the pay rates for the active pay items. The first pay item should use the employee's regular rate and the other pay item (the one that is special type Premium Wages) should use the employee's premium amount.
  4. During payroll check entry for the employee, you should enter hours for the pay item using the regular rate and for the pay item using the premium rate, to compensate the employee for their shift premium.

The check will show double the number of hours worked on the check, but because the hours associated with the premium rate pay items are excluded from WAOT calculation, the amount will be correct.

Top of page

Entering payroll checks for clients using WAOT

Enter payroll checks for the client as usual.

When payroll checks are entered for an employee that is subject to the WAOT calculation, the application uses the following formula to calculate the employee's overtime.

  1. The total gross pay of all pay items / the total hours entered (excluding Premium Wages pay items and any other excluded pay items)= Average Regular Rate.
  2. The Average Regular Rate x 0.5 (WAOT rate) = Premium Overtime Rate.
  3. The Premium Overtime Rate x total Overtime hours entered = WAOT amount.

Top of page

Example WAOT calculation

Example 24 button In the following example, assume the employee is set up with the following pay items.

Here is how the WAOT calculation works for this scenario.

Hours/amounts entered on the check:

Wages 1: 20 hours (15 reg + 5 OT) @ $12.00 $240.00
+ Wages 2: 30 hours (25 reg + 5 OT) @ $10.00 $300.00
+ Commission $600.00
=Total gross pay $1140.00

Weighted average overtime calculation (Premium OT):

$1140.00 (Total gross pay) / 50 (total hours) = $22.80 (Regular rate)
$22.80 (Regular rate)x 0.5 (WAOT rate) = $11.40 (Premium rate)
$11.40 (Premium rate) x 10 (number of OT hours) = $114.00 (WAOT amount)

WAOT example

Top of page

Share This