How the overtime rate is actually calculated
The FLSA rate is one and a half times the regular rate for hours over 40 in the workweek. The regular rate is not the advertised hourly wage. It is total straight-time remuneration for the week divided by hours worked, which means non-discretionary extras lift it.
What goes into the regular rate
- Hourly pay, salaries and shift differentials.
- Non-discretionary bonuses such as production, attendance and safety awards promised in advance.
- Commissions, including draw against commission.
- The value of board and lodging provided in place of wages.
Excluded are discretionary bonuses announced after the fact with no prior promise, gifts, expense reimbursements, paid time off taken, premium pay for weekend and holiday work, and employer profit-sharing and retirement contributions.
Why the shape of the pay matters
An hourly worker has already been paid the straight time for overtime hours, so only the half is added. A salaried non-exempt worker has also been paid straight time for all hours, so the same half applies. But a piece-rate worker with no hours guarantee has been paid by output, not by hour, and if that payment covers the overtime hours then the half still applies; if it does not, the full one and a half does.
Worked example
| Step | Figure |
|---|---|
| Base hourly rate | $20.00 |
| Attendance bonus earned in the week | $40.00 |
| Hours worked | 46 |
| Straight time paid | 46 x $20.00 = $920 |
| Regular rate | ($920 + $40) / 46 = $20.87 |
| Premium owed on 6 overtime hours | 6 x $20.87 x 0.5 = $62.61 |
| Total due | $1,022.61 |
Note the effect of the bonus: it raises the regular rate, so it raises the premium as well, even though it was earned once. Every non-discretionary payment has this leverage, which is why payroll systems often omit them from the calculation and why audits recover money.
Two rates in one week
An employee who does two jobs at different rates gets a weighted average across the week first, then the premium on that average. The employer cannot pay overtime only on the lower rate, and cannot pay a lower rate for the overtime hours at the higher job.