The employee’s regular rate of pay is the basis for calculating overtime. The regular rate is not simply an employee’s normal hourly amount. The regular rate is a term used to mean the employee’s actual rate of pay once all hourly earnings plus many other types of compensation are considered. The regular rate must include nearly all forms of pay received by that employee, including commissions, production bonuses, piece work earnings, and value of meals and lodging. Base overtime on the employee’s regular rate of pay including all the above forms of payment.
Amounts not included in the regular rate of pay are:
- Gifts (such as those received for holidays or birthdays, as a reward for service, the amounts of which are not based on hours worked, production, or efficiency);
- Hours paid but not worked (such as vacation, holidays and sick leave; reporting time; and split shift pay);
- Reimbursement of expenses;
- Discretionary bonuses (these are bonuses in recognition of services performed during a given period, provided that the fact that payment is to be made and the amount of payment are determined at your sole discretion at or near the end of the period);
- Profit-sharing plans (payments made in recognition of services performed during a given period, made to a profit-sharing plan or trust or bona fide thrift or savings plan, without regard to hours of work, production, or efficiency);
- Employment Retirement Income Security Act (ERISA) plan payments (irrevocable contributions for old age; retirement; life, accident, or health insurance; or similar employee benefits); and
- Overtime pay.
For an employee whose compensation is based wholly or partly on bonuses, commissions, or multiple hourly rates, you must calculate the regular rate of pay each workweek, because the employee’s overtime rate each week must be based on the regular rate of pay, not just the normal hourly rate of pay.
Calculating the regular rate of pay requires that all compensation received for the week (including multiple hourly rates, bonuses, commissions, etc.) be divided by the total number of hours worked.
|Hours Worked in the Pay Period:||45 (40 regular & 5 overtime hours)|
|Hourly Rate of Pay for Overtime:||$9.11 (($8×45)+($50/45))|