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:
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.
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