An employee’s regular rate of pay includes all compensation for employment except certain payments excluded by the FLSA. Compensation for employment may be determined on a piece-rate, salary, commission, or some other basis. The regular rate of pay is computed on the basis of the average hourly rate derived from such earnings (by dividing the total pay for employment in any workweek by the total number of hours actually worked).

Payments which are not part of the regular rate include pay for expenses incurred on the employer’s behalf, premium payments for overtime work or premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, reporting time pay, bona fide profit-sharing plan, gifts and payments in the nature of gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holidays, or illness. But bonuses and commissions that are based on fixed pre-established standards must be included.

Accordingly, 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

Here are some helpful examples of these formulas in practice:

• Example for Commission employee: An employee works 52 hours in a work and is paid $15 dollars and hour. But the employee also receives $160 dollars in commissions and a holiday bonus of $250 dollars. The first 40 hours will be paid at $15 per hour (or $600). The following 12 hours of overtime has to be paid at 1.5 times the employee’s regular rate. This employee’s regular rate is 52 hours by the employee’s hourly rate ($780) plus the employee’s commissions ($160) divided by the hours worked (52): $18.08 per hour. The holiday bonus is not included because it is not compensation for work, but more akin to a gift. Accordingly, the employees 12 hours of overtime is compensated a 1.5 times their regular rate of $18.08, for $325.44 (12 hours multiplied by $18.08 multiplied by 1.5 overtime premium.

• Example for a Salary employee: A non-exempt employee works 52 hours in a work and is paid a weekly salary $1,100. To determine the employee’s payment for the 12 overtime hours he or she worked over the 40 hour threshold, we must first determine his/her regular rate. To do so, we take the employee’s weekly earnings and divide by the number of hours worked in the workweek ($1,100 divided by 52 hours) or $21.15. Because the employer has already paid the employee for the workweek through their salary, you only will multiply the regular hourly rate by 0.5 (instead of 1.5) to get the overtime hourly rate. This would be $10.58. You then multiple the overtime hourly rate ($10.58) by the number of overtime hours worked (12 hours) for a total of $126.96.

• Example for a Piece-Rate employee: An employee works 52 hours in a work and is paid $50 dollars per delivery made. If this employee made 18 deliveries in the workweek for a total $900 ($50 multiplied by 18 deliveries). To determine the employee’s payment for the 12 overtime hours he or she worked over the 40 hour threshold, we must first determine his/her regular rate. We still take the employee’s weekly earnings and divide by the number of hours worked in the workweek ($900 divided by 52 hours) or $17.31. Because the employer has already paid the employee for the workweek through their piece rate, you only will multiply the regular hourly rate by 0.5 (instead of 1.5) to get the overtime hourly rate. This would be $8.66. You then multiple the overtime hourly rate ($8.66) by the number of overtime hours worked (12 hours) for a total of $103.92.

To read more about “Regular Rate of Pay” under the FLSA, please see U.S. Department of Labor Fact Sheet #56A or the Department’s Handy Reference Guide.