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Piece-Rate Pay and Overtime Calculation

Understanding Piece-Rate Pay and Overtime Calculations

Piece-rate pay allows you to compensate employees based on the number of units completed or tasks performed, rather than by the hour. This pay structure can be enabled by request for your account. Before you process payroll using piece-rate earnings, it’s important to understand how it affects overtime calculations and payroll reporting for Nonexempt workers.

How Overtime Works with Piece-Rate Pay

When an employee is paid on a piece-rate basis and works overtime, their overtime must be calculated using a weighted average method, which ensures their overtime rate accounts for all types of pay they earned during the pay period.

    Eddy does not automatically calculate the regular rate of pay for weighted overtime, so you’ll need to determine it manually before entering overtime amounts. The formula to compute the regular rate is:

    Total compensation in the workweek (except for statutory exclusions) ÷ Total hours worked in the workweek = Regular Rate for the workweek. 

    The FLSA gives a list of statutory exclusions here. Once you have the regular rate, apply the appropriate overtime multiplier. For paying only the overtime premium (where regular hours are paid elsewhere): multiply the regular rate by 0.5.

      Overtime Exemptions

      Overtime rules under the Fair Labor Standards Act (FLSA) only apply to employees classified as non-exempt. That means piece-rate overtime calculations, including weighted overtime, are only required for workers who are eligible for overtime based on their FLSA status and any applicable state or local laws.

      Exempt employees are not entitled to overtime pay under FLSA, even if they are paid on a salary, piece-rate, or another alternative pay structure, so you should only use the weighted overtime process in this article for non-exempt team members. If you are unsure whether an employee should be classified as exempt or non-exempt, review your job descriptions, salary levels, and duties against FLSA criteria and consult legal or HR counsel as needed.