How to calculate blended overtime pay: Contractor’s guide

Construction isn’t like other industries. Crews jumping from one location to another in the same week is routine, and each of those moves comes with its own set of challenges. One of the toughest wrinkles to smooth out is overtime. How do construction companies manage when overtime kicks in across different jobs at different rates in a single workweek?

This guide explains how blended overtime pay solves that problem. Learn when blended overtime applies, how to calculate it, and how to use smart payroll software to get it right every time without the manual math.

What is blended overtime pay?

When a non-exempt worker earns more than one wage rate in a workweek, employers have to pay that worker properly for extra hours. Often, they follow a specific method established by the Fair Labor Standards Act (FLSA) called blended overtime. If employers would prefer to use a different method, employees must agree in writing before starting the work.

Blended overtime, sometimes known as weighted average overtime, is based on a weighted average of all the rates a worker earned that week across jobsites and classifications. The goal is to make sure overtime pay actually reflects the work put in instead of a single arbitrarily chosen rate.

Blended applies to salaried non-exempt workers, too. Salaried non-exempt employees have a regular rate of pay to base the overtime calculation on just like hourly employees; it just takes a little extra math. For example, a salaried employee who makes $1,500 per week based on a 40-hour workweek has a regular rate of pay of $1,500 divided by 40, which is $37.50 per hour. This only works if they don’t receive any other forms of includable compensation.

But the regular rate of pay goes beyond wages and salaries alone. It incorporates total straight-time earnings. Non-discretionary bonuses like performance or safety incentives count toward that total, even though they don’t add additional hours worked.

Workweeks that come with many moving parts like these aren’t exceptional in the construction industry. A single field worker might hop between federal Davis-Bacon jobs, private jobs, and even across state lines over the course of a standard 40-hour workweek.

How to calculate blended overtime pay in construction: 4 steps

Here’s how to calculate blended overtime in construction according to FLSA guidelines.

1. Calculate total straight-time earnings.

The first step is finding out how much the worker made in straight-time earnings for the week. Multiply the hours worked by each relevant hourly rate, then add all the results together. Then, add in any additional straight-time compensation like non-discretionary bonuses and commission.

2. Determine the blended regular rate of pay.

Next, divide total straight-time earnings by the total number of hours worked that week across all wage rates to arrive at the blended regular rate of pay. This is the weighted average the rest of the calculation relies on. It’s a single hourly rate that includes everything the worker earned, no matter how many different jobs or classifications they took on.

3. Calculate the overtime premium.

Find the half-time rate by multiplying the blended regular rate by 0.5 (or simply dividing by 2). Then, work out how many overtime hours the employee worked, i.e., the number of hours worked over 40. Multiply that number by the half-time rate to find the overtime premium.

Contractors use 0.5x in this case rather than 1.5x because the straight-time pay already covers the blended rate for each hour worked, including overtime. So, finding the premium means calculating the additional pay employees earn on top of their blended rate, which satisfies the FLSA requirements.

4. Add up total pay for the workweek.

Finally, add the overtime premium to total straight-time earnings to get the worker’s total, all-inclusive pay for the week.

Blended overtime calculation example

Here’s an example of a field worker splitting a week between 32 hours worked at $21 per hour and 16 hours worked at $30 per hour to illustrate how these steps work together:

1. Calculate total straight-time earnings: (32 hours x $21 per hour) + (16 hours x $30 per hour) = $1,152
2. Determine the blended regular rate of pay: $1,152 total straight-time earnings / (32 hours + 16 hours) = $1,152 / 48 hours = $24 per hour
3. Calculate the overtime premium: ($24 per hour x 0.5) × (8 hours worked over 40) = $12 per hour x 8 = $96
4. Add up total pay for the workweek: $1,152 total straight-time earnings + $96 overtime earnings = $1,248

When do blended overtime rules apply in construction?

Blended overtime rules don’t always apply, but they often come with thorny compliance risks when they do. Here’s a look at some typical situations that trigger blended overtime rules and some of the associated compliance hurdles to know.

Common blended overtime scenarios

Workers are generally entitled to blended overtime when they:

• Move between multiple union classifications: A worker might spend part of the week as a carpenter and the rest as a laborer, each of which comes with its own union rate. Employers have to blend these into a single overtime calculation.
• Split time between prevailing wage jobs and private jobs: A crew working half the week on a federal public works job and half on a private-sector job moves between a prevailing wage and a private wage the contractor has to average together.
• Work across different locations: Crews that work across state or municipal lines may earn different rates at each jobsite, all of which need to be accounted for.

Compliance risks to watch out for

Compliance can get complicated when:

• State or local overtime laws have stricter rules than the FLSA: Jurisdictions can set their own overtime rules, and contractors must follow the stricter regulation. Take California, for instance. They require employers to pay overtime for any hours worked beyond eight in a single day, so workers can earn overtime while still staying within the FLSA’s 40-hour workweek limit. 
• Employers use biweekly pay cycles: In this case, the blended rate has to be calculated separately for each workweek because the FLSA defines overtime on a weekly basis, not a per-period one. Averaging hours across a two-week period can leave overtime unaccounted for. For example, if an employee works 35 hours one week and 45 the next, the average hours worked comes out to (35 + 45) / 2 = 80 / 2 = 40 hours. Based on this result, the worker wouldn’t receive the blended overtime premium for the five overtime hours they worked in the second week.

Automate blended overtime calculations with Miter.

Blended overtime calculations come down to a simple formula, but the accuracy of the results depends on the quality of the inputs. Getting it right takes a construction-first payroll system that captures every last detail of a crew’s workweek, from jobs to roles to rates. 

That’s exactly what Miter’s Payroll, Time Tracking, and HRIS solutions are designed for. Time Tracking links hours to field workers, jobs, and activities that flow directly into Payroll, which auto-calculates the blended regular rate so contractors don’t have to. That takes the manual math, and the mistakes that come with it, out of the picture. Miter also covers public works jobs: Payroll can be set to pay a worker’s prevailing wage classification rate whenever it’s higher than the blended rate, so nobody comes up short on a Davis-Bacon job.

Frequently asked questions

Is blended overtime the same as weighted average overtime?

Yes, these terms refer to the same concept. The FLSA uses “weighted average,” but “blended overtime” is also common in construction and payroll contexts.

Does blended overtime still apply if I run payroll biweekly?

Yes. In that case, employers need to calculate overtime pay weekly to comply with FLSA rules; failing to do so might mean underpaying employees. Say John works 45 hours one week and 35 the next, so his biweekly check would cover 80 hours. If payroll misinterprets this as a typical 40-40 split, they won’t add overtime to his check. As a result, he’ll be short five overtime hours for week one’s efforts.

Do salaried non-exempt employees get blended overtime?

Yes, salaried non-exempt employees are still entitled to blended overtime if they work across rates or roles. Employers calculate their implied hourly regular rate by dividing the employee’s weekly salary by the number of hours it’s based on, often 40.

What is the difference between blended overtime and a shift differential?

Blended overtime is a weighted average calculation that accounts for every rate a worker earned over a particular week, no matter how many rates they moved between. A shift differential, on the other hand, is a flat-rate compensation bump to incentivize taking less desirable shifts, such as an extra $3 per hour for working an overnight shift.