Employers are generally required to pay nonexempt employees overtime compensation of at least one and a half times their regular rate of pay for hours worked over 40 in a workweek. While this is nothing new for employers, determining an employee’s regular rate is often more complex than one might think, and it is often a great cause of confusion for employers.
As we have previously discussed on this blog, the regular rate is a term of art that encompasses all nondiscretionary payments to an employee, and not just hourly wages—subject to certain exceptions. (For a discussion of what must be included in the regular rate, please see our prior post.) If, for instance, an hourly, non-exempt employee receives a productivity bonus, the regular rate for that employee is the hourly rate of pay plus the productivity bonus.
The Department of Labor Fact Sheet #56A explains the basic calculation of the regular rate in the following way:
Total compensation in the workweek (exclusive of statutory exclusions) ÷ Total hours worked in the workweek = Regular rate for the workweek
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