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State specific payroll information

California weighted average overtime calculation

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:
  • The client has a non-exempt employee who holds more than one position/job description with the company, each with a different hourly rate of pay, and has overtime hours.
  • The client has a non-exempt employee who has overtime hours and is partially compensated by a non-hours-based payment, such as commission.
  • The client has a salaried, non-exempt employee and pays the employee a fixed salary for a fluctuating work week. The employee must still be compensated for overtime hours on a half-time basis.

Set up California 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 a special type California Weighted Average Overtime.
Create and add payroll items for your client. In the
Special Type
 section, select
Weighted Average Overtime
 and mark the
CA weighted average overtime
checkbox.

Set 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 CA 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. Create and add payroll items for your client to add a new shift premium pay item. In the Special Type section, select
    Premium Wages
    .
  2. In the Exclusions section, mark the
    Weighted average overtime calculation
     checkbox.
  3. Add payroll items to an employee record, and in the
    Payroll Items
     tab of the
    Employees
     screen, select as active both the pay item set up as special type
    CA Weighted Average Overtime
     and the pay item set up as special type
    Premium Wages
    .
  4. In the
    Rate
     column, enter the pay rates for the active pay items. The 1st 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.
  5. 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.

Set up a California Bonus pay item for a client

When you're using the California WAOT calculation, you should factor a fixed amount bonuses into an employee's regular rate of pay. For example, paying a $25 bonus amount to any employee who works a holiday, regardless of how many hours they work during the rest of the work week.
  1. Create and add payroll items for your client.
  2. In the Wage Type section, select the
    Supplemental
     option and mark the
    Bonus (CA)
     checkbox.

Set up an employee to use a CA 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 CA Weighted Average Overtime.
Add payroll items to an employee. The pay item that you select as active for the employee must be set up as a special type
Weighted Average Overtime
with the
CA weighted average overtime
 checkbox marked.

Excluding pay items from WAOT calculations

If an employee has an active pay item set up as a special type CA 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. Select
    Setup
    ,
    Payroll Items
    , then the
    Main tab
    .
  2. Select the payroll item that you want to exclude then select
    Edit
    .
  3. In the Exclusions section, mark the
    Weighted average overtime calculation
     checkbox.
  4. Select
    Enter
     to save the change.

Enter payroll checks for clients using CA WAOT

Enter payroll checks for the client,
When payroll checks are entered for an employee that is subject to the CA WAOT calculation, the application uses the following formula to calculate the employee's CA WAOT.
  1. The total gross pay of all pay items (excluding California Bonus) / (the total regular hours entered + total overtime hours) (excluding Premium Wages pay items and any other excluded pay items) = Average regular rate.
  2. ((Total CA Bonus amount * (Overtime Amount on Distribution / Total Overtime Amount on Paycheck)) / regular hours * 1.5) * Total OT hours = Bonus on distribution.
  3. (Average regular rate * 0.5 * OT hours on distribution) + Bonus on distribution = CA WAOT amount.

This article applies to:

  • Product: Accounting CS
  • State: California
  • Subject: Payroll checks,Payroll tax forms

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