With the slowdown in the oil patch, many service providers are looking for ways to better match employee compensation with reduced amount of work and revenue available without having to reduce headcount. One way to accomplish this objective is to pay different rates for different work. For example, a company may elect to pay a nonexempt employee a certain hourly rate for revenue generating work and a different, typically lower hourly rate for non-productive or non-revenue generating work (e.g., shop time).
The DOL’s regulations explain how a company calculates the overtime rate where an employer compensates its nonexempt employees at two different rates. The regulations provide that:
Where an employee in a single workweek works at two or more different types of work for which different nonovertime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs.
Compensating employees at different rates for different work is an effective way to pair employee compensation with revenue a company is generating and can delay or reduce the number of layoffs a company many have to conduct during times of slow work.
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