When calculating overtime under the FLSA, employers are required to pay employees an overtime rate of one and a half times their regular rate for all hours worked in a workweek in excess of 40, unless the employee is otherwise exempt. 29 USC 207.
An employee’s regular rate is the hourly rate an employee is paid for all non-overtime hours worked in a workweek. 29 CFR 778.108; 29 USC 207(e); Walling v. Youngeman-Reynolds Hardwood Co., 325 U.S. 419 (1945). When calculating an employee’s regular rate, all compensation received by the employee in a workweek must be included, including wages, bonuses, commissions, and any other forms of compensation. 29 CFR 778.109.
The FLSA does not require employers to pay employees on a weekly basis. They may be paid weekly, semi-monthly, monthly, or less frequently (some states have laws regulating the frequency an employer must pay employees). However, when calculating the regular rate, it must to done on an individual workweek basis. There are statutory exceptions to the regular rate requirements found in 29 CFR 778.400 through 778.421.
Below are discussions of how to calculate the regular rate for employees paid by:
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Hourly rate employees
For employees paid hourly, their regular rate is typically their established wage rate for non-overtime hours worked. If they work in excess of 40 hours in a workweek, they receive one-and-a-half times their hourly rate. 29 CFR 778 110(a).
If employees receive an hourly rate plus a bonus or other type of compensation, the calculation of the overtime rate changes. In this case, the regular rates is determined by taking the hourly rate and multiplying it by the total number of hours the employee worked in the workweek. The resulting amount is then added to the bonus and any other type of compensation received. The total of the hourly wages, the bonus, and other compensation is then divided by the total number of hours worked by the employee in the workweek. The resulting amount is the regular rate. 29 CFR 778.110(b). For example, if an employee works 46 hours in a workweek, is paid $12 per hour, and receives a $46 bonus, the regular rate would be calculated as follows. The employer would multiply the 46 hours worked by the hourly rate of $12, which would equal $552. Then, the $46 bonus would be added to that amount, equaling $598. Finally, the $598 would be divided by 46 hours resulting in a regular rate of $13 per hour. The overtime rate would be $19.50. To complete the calculation, the employee would receive $520 in regular wages ($13 x 40 hours) and $117 in overtime wages ($19.50 x 6 hours) for a total of $637 for the workweek. 29 CFR 778.110(b)
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Pieceworkers
Some employees are paid a certain amount of money based on completing a specific task or a certain project. To determine the regular rate for pieceworkers, the entire compensation paid to the employees for a workweek, including any bonus, is divided by the actual number of hours worked by the employee. The resulting amount is the regular rate. To calculate the total amount of overtime owed, the employer would take the total number of overtime hours worked and multiply it by ยฝ of the regular rate. 29 CFR 778.111 (a). For example, if an employee earns $400 in a workweek performing piecework, receives a $50 bonus, and works 45 hours, the regular rate would be calculated as follows. The employer would add the $400 piecework compensation and the $50 bonus for a total of $450. Then, it would divide the $450 by the 45 hours worked in the workweek resulting in a $10 per hour regular rate. To determine how much overtime is owed, the employer would multiply ยฝ the regular rate ($5 per hour) by the number of overtime hours worked (5) for a total of $25 of overtime pay. The total wages for the workweek would be $475. Paying overtime hours at one-half the regular rate in addition to the piece-rate compensation satisfies the overtime requirements because the hours worked beyond 40 have already been compensated at the straight time regular rate as part of the piece-rate compensation.
In some situations, an employer pays an employee a piece-rate with a minimum hourly guaranty. In these situations, the employer must calculate the employee’s regulate rate based on either the piecework compensation, if the employee meets the minimum threshold, or the hourly rate compensation, if the employee does not meet the threshold. 29 CFR 778.111(b).
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Day and job rates
If an employer pays an employee a flat rate per day or per job no matter how many hours are worked, the regular rate is determined by dividing the total compensation received in a workweek by the hours the employee actually worked. 29 CFR 778.112. For example, if an employee is paid $100 per day, works five days in the workweek, and works a total of 50 hours, the regular rate would be calculated as follows. The employer would multiply the $100 daily rate by the five days worked by the employee, which equals $500. Then, it would divide the $500 by the 50 hours worked in the workweek which results in a regular rate of $10 per hour. To determine how much overtime is owed, the employer would multiply ยฝ the regular rate ($5 per hour) by the number of overtime hours worked (10) for a total of $50 of overtime pay. The total wages for the workweek would be $550. Paying overtime hours at one-half the regular rate in addition to the day or job-rate compensation satisfies the overtime requirements because the hours worked beyond 40 have already been compensated at the straight time regular rate as part of the day or job-rate compensation.
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Salaried employees
Weekly salary
If an employer pays an employee a weekly salary for working a specific number of hours, their regular rate of pay is computed by dividing the salary by the number of hours in their workweek. For example, if they employee is paid a salary of $400 for working a typical 40 hour workweek, the regular rate is $10 ($400 divided by 40 hours). The employer would be required to pay the employee an overtime rate of $15 per hour for any hour worked over 40 in a workweek. 29 CFR 778.113 (a).
Salary other than weekly
All salaries, no matter the frequency with which they are paid, must be reduced to a workweek equivalent so an hourly rate can be calculated. Under certain circumstances, the parties can agree to calculate the regular rate by determining a monthly salary based on number of working days in the month and using that number to calculate the regular rate as long as the regular rate is not less than the statutory minimum wage rate. 29 CFR 778.113(b).
Fixed salary for fluctuating hours
Some employees are paid a fixed salary but work a different amount of hours each workweek. For example, one workweek an employee may work 30 hours and another week 50 hours. In this situation, the regular rate will fluctuate and is determined based on each individual workweek. The regular rate is determined by dividing the salary by the number of hours actually worked in the particular workweek. In workweeks where employees work in excess of 40 hours, they must be paid the overtime rate based on their regular rate for that workweek. For example, if they work 50 hours and the fixed rate salary is $500 a week, the regular rate for that workweek is $10 per hour. To determine how much overtime is owed, the employer would multiply ยฝ the regular rate ($5 per hour) by the number of overtime hours worked (10) for a total of $50 of overtime pay. The total wages for the workweek would be $500. Paying overtime hours at one-half the regular rate in addition to the salary compensation satisfies the overtime requirements because the hours worked beyond 40 have already been compensated at the straight time regular rate as part of the salary compensation. 29 CFR 778.114(a) and (b).
An employer may only use the fluctuating workweek method of paying overtime if the salary is large enough to assure that the employee is not paid less the minimum wage for all hours worked in any workweek. Additionally, the employee must clearly understand that the salary covers all hours the job may demand in a particular workweek. The employer must pay the salary even though the employee does not work all scheduled hours in a workweek. Other requirement for paying employees on the fluctuating workweek method apply. 29 CFR 778.114(c).
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Employees being paid two or more rates
If employees work at two different pay rates in a single workweek, the regular rate for the workweek is determined by adding the rates together and dividing the total by the number of hours worked. 29 CFR 778.115. There are some exceptions discussed in 29 CFR 778.400 and 29 CFR 778.415 to 778.421.
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Wages paid with alternatives to cash
When employees are paid with goods or benefits, such as lodging, the fair market value of the noncash benefit must be calculated and added to the cash wages before determining the regular rate. 29 CFR 778.116.
)jxช๊-๎ซจถ eท๛)jx-Timeliness of overtime payments
Generally, employers must pay employees overtime on the payday which covers the pay period in which the overtime hours were worked. If calculating overtime is too complicated, the employer must pay the overtime as soon as it can reasonably be calculated. If there is a retroactive pay raise, retroactive overtime must be paid when the first increase in compensation is paid. 29 CFR 778.106. See also 29 CFR 778.209 and 29 CFR 778.303.
