What is the FLSA Regular Rate of Pay?
The regular rate of pay is the average hourly rate an employee earns for all non-overtime hours worked in a single workweek. The FLSA mandates that non-exempt employees receive overtime pay at a rate not less than one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.
Crucially, the regular rate includes almost all forms of compensation, not just the stated hourly wage. Failing to include additional compensation in the regular rate is a frequent cause of Department of Labor wage violations.
Includable vs. Excludable Remuneration
Employers must include non-discretionary bonuses, commissions, shift differentials, and on-call pay in the regular rate calculation. A bonus is non-discretionary if it is promised to employees upon meeting certain criteria (e.g., an attendance or production bonus).
Certain payments are excludable from the regular rate. These include discretionary bonuses (where the employer retains sole discretion on the fact and amount of the bonus until near the end of the period), gifts, paid time off, and reimbursements for business expenses.
How to Calculate the Regular Rate with a Bonus
To find the regular rate for a workweek, sum all includable compensation and divide by the total hours actually worked.
Calculation Formula: (Hourly earnings + Non-discretionary bonuses) / Total hours worked = Regular Rate. For example, if an employee works 50 hours at $15/hour and receives a $100 production bonus: Base pay is $750. Total compensation is $850. The Regular Rate is $850 / 50 hours = $17.00/hour. The overtime premium is half the regular rate ($8.50) times the 10 overtime hours, adding $85.00 for a total gross pay of $935.00.
Handling Multiple Pay Rates (Weighted Average)
If an employee works at two or more different hourly rates in a single workweek, the employer must generally use the weighted average method to determine the regular rate.
You calculate total straight-time earnings from all rates, add any bonuses, and divide by the total hours worked across all jobs. The resulting average rate is then used to calculate the time-and-a-half overtime premium for any hours over 40.
Frequently asked questions
Are holiday bonuses included in the regular rate?
Typically, no. If a holiday bonus is given as a gift and the amount is not strictly tied to hours worked or productivity, it can be excluded from the regular rate.
What happens if a bonus covers a whole quarter, not just one week?
When a bonus covers a long period, it must be apportioned back over the workweeks in which it was earned. The employer must recalculate the regular rate for those past weeks and pay the retroactive overtime difference.
Does paid time off (PTO) count towards the 40-hour overtime threshold?
No, only hours actually worked count towards the 40-hour threshold for calculating FLSA overtime.
Can employers and employees agree to waive the regular rate rules?
No. The FLSA requirements for regular rate and overtime calculations cannot be waived by agreement between the employer and the employee.