For the most part, employees who are covered by the Fair Labor Standards Act ("FLSA") must receive overtime pay for hours worked in excess of 40 in a workweek at a rate of at least one and one-half times their "regular rates of pay." But, what exactly is "regular rate of pay?"
There are several things that are included and excluded when figuring out your regular rate of pay. In addition, the way in which you're paid—salary or piece-rate, for example—directly impacts how your overtime is calculated.
What's Included in an Employee's "Regular Rate of Pay?"
The regular rate of pay cannot be less than the minimum wage. The regular rate includes all remuneration, or "payment," for employment, such as:
- Wages or salary
- Non-cash wages in the form of goods, board, or lodging
- Non-overtime premium payments, such as night shift pay differentials and premiums paid for hazardous, arduous or dirty work
There are other items that are included in the regular rate, so be careful to check the FLSA regulations for details on what's included.
The regular rate of pay does not include things like:
- Premium payments for overtime work or extra pay for work on Saturdays, Sundays, and holidays
- Sums paid as gifts and payments as a reward for service, such as gifts made at Christmas time
- Payments for occasional periods when no work is performed due to vacation, holidays, or illness
Again, the FLSA lists numerous items that are not included in the regular rate, so be sure to check them if you're uncertain about an exclusion.
Calculating the "Regular Rate of Pay"
The FLSA applies on a workweek basis; a workweek is a fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods. An employee can be paid on a salary, commission, piece rate or other basis, as well as by the hour.
Generally, the regular rate for all such employees calculated by dividing his or her total compensation for the workweek (minus the items listed above) by the total number of hours he or she actually worked during that week. For example:
- For an employee paid by the hour, the hourly rate is, of course, his or her regular rate. For overtime hours, the employee must be paid one and one-half times the hourly rate for all hours worked in excess of 40 in the workweek
- The regular rate of a pieceworker is computed the same way as for an hourly employee, but a pieceworker's overtime rate is only one-half the regular rate
- For salaried employees, the regular rate is calculated by dividing that salary by the number of hours for which the salary is intended to cover, if that time is 40 hours or less. If the salary covers a period longer than the workweek, the workweek equivalent must be computed in order to determine the regular rate of pay. A monthly salary, for instance, is converted to its equivalent weekly wage by multiplying that salary by 12 (months in the year) and dividing that product by 52 (weeks in the year)
What if you do two or more different types of work at varying wage rates during a single workweek? There are two ways to calculate the regular rate here. One way is to divide total earnings for the week (again, minus exclusions) and dividing the earnings by the total number of hours worked at all jobs in the week. Overtime compensation is due in the amount of one-half times the regular rate for hours worked in excess of 40.
Under the second method, overtime may be computed based on rates not less than one and one-half times the rates applicable to the job, but for this method to apply:
- The employee's hourly earnings must at least equal the minimum wage
- The employee and employer must agree to use this alternate overtime method before any work is done, and
- The employer must properly pay overtime compensation on other forms of additional pay required to be included in the regular rate, like non-cash wages, such as room and board
Questions For Your Attorney
- Which of the two methods is better for calculating the regular rate for an employee who works more than one job for me during the week?
- My employer makes me work on two Sundays each month, without extra pay. Can he do that?