Regular Rate of Pay: Overtime With Bonuses and Two Rates

What the regular rate is

Under the FLSA, a covered non-exempt employee gets overtime for hours worked over 40 in a workweek, at not less than 1.5 times the regular rate.

The regular rate is always an hourly rate, even for people paid by salary, piece or commission. The Wage and Hour Division (WHD) states the formula in Fact Sheet #56A: total pay for the workweek, except the statutory exclusions, divided by total hours worked in that workweek.

Three points follow from that definition:

• It is weekly. Each fixed 168-hour workweek has its own regular rate. A bi-weekly paycheck can contain two different ones.
• It is based on facts, not labels. Fact Sheet #56A says the regular rate cannot be circumvented by an agreement. Calling a bonus “discretionary” does not make it so.
• It cannot be lower than the minimum wage, including a higher state or local minimum wage where one applies.

Once you have the regular rate, the overtime math is simple. Every hour is paid at straight time, and each hour over 40 adds half the regular rate. That “half” is the overtime premium.

What goes in and what stays out

The statute, 29 U.S.C. 207(e), lists the only payments that may be left out. Fact Sheet #56A calls the list exhaustive: anything not on it goes in.

Two details trip people up.

Excluded is not the same as creditable. Fact Sheet #56A says that, unless specifically noted, excluded payments cannot be credited toward overtime owed. Holiday pay for a day you did not work stays out of the regular rate, but it does not pay any overtime either. Only true overtime premiums count toward FLSA overtime.

Time not worked does not count toward the 40. Paid holiday, vacation and sick hours are not hours worked under the FLSA. A week of 40 worked hours plus an 8-hour paid holiday has no federal overtime, because only the 40 worked hours count.

On bonuses, the test is about the decision, not the name. If the employer promised the bonus in advance, or employees expect it under a plan or practice, it is nondiscretionary and it goes in. Fact Sheet #56A adds that the label and the reason for a bonus do not decide whether it is discretionary.

How to calculate it, step by step

This is the default method from 29 CFR 778.110 and 778.115 and Fact Sheet #23. It works for one rate, two rates, differentials and weekly bonuses.

1. Fix the workweek. Use your employer’s 168-hour workweek, not the pay period. Do each week separately.
2. Total the hours actually worked in that week, at every job and every rate. Leave out paid time off.
3. Add up straight-time earnings. Multiply each rate by the hours worked at it, add differentials, and add any nondiscretionary bonus earned that week.
4. Divide earnings by hours. The result is the regular rate for that week. It is a weighted average when there are several rates.
5. Find the overtime hours: hours worked over 40 in that week.
6. Compute the premium: 0.5 × regular rate × overtime hours.
7. Add it up: total pay = straight-time earnings + premium.

Step 7 already pays every hour, including the overtime hours, at straight time. That is why the premium is half the rate, not one and a half. Paying 1.5 × the regular rate for overtime hours on top of straight time for all hours would double-count. Paying 1.5 × only the base rate under-counts when there is a bonus or a second rate.

Common mistakes

• Using the pay period instead of the workweek. Each workweek stands alone, and a bi-weekly period cannot be averaged.
• Leaving out a promised bonus because it was paid later or called discretionary.
• Leaving out a differential because it is not part of the base rate.
• Crediting holiday or vacation pay toward overtime owed.
• Paying 1.5 times the regular rate on overtime hours and straight time on all hours. That double-counts the overtime hours’ straight time.
• Treating a weekly salary as exempt pay without checking the exemption tests.

Worked example: two rates in one week

Inputs, exactly: one 168-hour workweek. 30 hours at $20.00 an hour (regular job) and 15 hours at $24.00 an hour (a second job for the same employer). No bonus.

A common shortcut pays the half-time premium on the lower base rate, $20.00. That gives a premium of $50.00, which is $3.33 short of the weighted method for this week. The gap grows with more overtime hours and a bigger difference between the rates.

The calculation does not care which job the overtime hours happened at. Under the default method, all 45 hours are blended into one rate. The only exception is the advance agreement described in the section on 7(g)(2) below.

Bonuses: weekly, monthly and longer

A weekly bonus is added to that week’s earnings before you divide. The DOL’s own example in 29 CFR 778.110(b): $12.00 an hour for 46 hours plus a $46 production bonus. Earnings are $598.00, the regular rate is $13.00, and the total due is $637.00. Without the bonus, the same week pays $588.00.

A bonus that covers more than one week (monthly, quarterly, annual) can wait. Under 29 CFR 778.209, the employer may pay overtime on the hourly rate alone until the bonus amount is known. Then the bonus is apportioned back over the weeks in which it was earned. For each of those weeks that had overtime, the employee gets an extra half of the bonus’s hourly share times the overtime hours.

Example, with stated inputs: a week of 45 hours at $20.00, to which the employer allocates $40.00 of a quarterly bonus. Without the bonus, the premium for that week was $50.00. With the $40.00 included, the regular rate becomes $20.8889 and the premium becomes $52.22. The extra owed for that week when the bonus is paid is the difference, $2.22.

How the bonus is split across weeks matters. 778.209(b) allows a reasonable and equitable method when the bonus cannot be traced to particular weeks. Two examples it gives are an equal amount per week, or an equal amount per hour worked in the bonus period.

Shift differentials and other premiums

A night or weekend differential paid per hour is part of the regular rate. 29 CFR 778.207(b) says the Act requires including nightshift differentials, whether they are a percentage of the base rate or so many cents an hour. Hazard and “dirty work” premiums are included too.

Example, with stated inputs: 32 hours at $18.00 base and 12 night hours at $20.00 ($18.00 plus a $2.00 differential), 44 hours in the week. The regular rate is $18.5455, and the premium for the 4 overtime hours is $37.09. On the base rate alone, the premium would be $36.00, so the differential adds $1.09 to the premium that week. The week’s total is $853.09.

Some premiums are different. A premium of at least 1.5 times a good-faith rate for work on Saturdays, Sundays, holidays or the 6th or 7th day is excluded from the regular rate. So is a contract premium of at least 1.5 times for hours outside a normal workday (up to 8) or workweek (up to 40). Fact Sheet #56A says these may be credited toward FLSA overtime owed. A lump sum paid regardless of hours is not an overtime premium. 778.207(b) says it goes into the regular rate.

The rate-in-effect option: section 7(g)(2)

There is one alternative to the weighted average for people who work two kinds of jobs at different rates. Under section 7(g)(2) and 29 CFR 778.419, the employee and employer may agree in advance, before the work is done, to pay overtime hours at 1.5 times the rate for the type of work done during those overtime hours.

The conditions are strict. Each rate must be bona fide, meaning it is the rate actually paid for that work in non-overtime hours and at least the minimum wage. The overtime hours paid this way must cover at least all hours over 40.

Using the worked example’s 45-hour week, here is how the choice of method moves the total:

Without an agreement made before the work, the default weighted average applies. Whether a given agreement meets 778.417 and 778.419 is a question for the employer’s payroll records and, if disputed, the WHD.

Salaried non-exempt: fixed hours and the fluctuating workweek

A salary does not make someone exempt. The exemption tests are separate and are covered in the guide on exempt vs non-exempt. For a non-exempt salaried employee, the regular rate depends on what the salary is understood to cover.

Salary for a fixed schedule. 29 CFR 778.113 divides the weekly salary by the hours it is intended to compensate. Two DOL examples, run through the calculator engine:

• $350 a week for a 35-hour week gives a regular rate of $10.00. The DOL says each hour up to 40 is paid at $10.00 and each hour after that at $15.00. For a 41-hour week, the engine gives $400.00 of straight time (the $350 salary plus 5 hours at $10.00) and a $15.00 overtime line, $415.00 in total.
• $405 a week for a 45-hour schedule (Fact Sheet #23) gives a regular rate of $9.00. The salary already covers the 45 hours at straight time, so the 5 overtime hours add half-time: $22.50, for $427.50.

Monthly and semimonthly salaries are first turned into a weekly amount. Multiply a monthly salary by 12 and divide by 52, or a semimonthly salary by 24 and divide by 52.

Fluctuating workweek (FWW). Under 29 CFR 778.114, a fixed salary can cover all hours worked, whatever they are, if five conditions are met. Hours must actually fluctuate. The salary must not vary with hours. It must cover at least the minimum wage in the longest weeks. Both sides must have a clear mutual understanding. And overtime must be paid at no less than half the regular rate. The regular rate is the salary (plus any non-excludable extras) divided by that week’s hours, so it changes every week.

Some states limit the FWW. From the site’s state data, Pennsylvania divides a non-exempt salary by 40 hours and does not allow the federal FWW method, and New Hampshire and Rhode Island do not allow it for delivery drivers and sales merchandisers. Check your state’s row on the overtime laws by state page.

The DOL’s own examples, recomputed

Every regulation example below was entered into the same engine the site’s regular rate calculator uses. Where the two differ, it is by one cent of rounding, and the reason is given.

The one-cent differences come from rounding order. The regulation rounds the regular rate to the cent first ($13.64) and then multiplies. The engine carries the unrounded rate ($13.6364) through and rounds the premium once. Neither changes the method. If your employer’s payroll system rounds the rate first, that is the likely reason for a difference of a cent or so in a week; the gap can reach a few cents when there are many overtime hours.

If your pay stub does not match

If your pay stub does not match these rules, start with your employer’s payroll records and ask how the regular rate was computed. Your state labor department or the U.S. Department of Labor’s Wage and Hour Division (1-866-487-9243) can review a pay question. The overtime premium on a stub is also the starting point for the federal overtime deduction. The guide to no tax on overtime explains which part counts.

Next step

Enter your week’s rates, hours and any bonus in the regular rate calculator. It shows the regular rate, the overtime hours and the premium line by line, as in the worked example above. It assumes a non-exempt employee and the federal rule.