Calculating Overtime Pay

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Overtime pay is calculated by multiplying the employee’s regular rate of pay by one and one-half times the number of overtime hours worked. The regular rate is defined as the rate per hour paid for normal non-overtime work. In cases in which the employee is paid on a weekly basis, the regular rate is determined by dividing the weekly salary by the number of hours in the employee’s regular workweek. Payments which need not be included in the regular rate include reimbursement for expenses incurred on the employer’s behalf; premium pay for extra time worked (holidays, weekends, additional hours over regular schedule); discretionary bonuses, gifts and payments in the nature of gifts on special occasions; reasonable uniform allowances; and payments for occasional periods when no work is performed due to vacation, holidays or illness.

The following are examples of compensation paid to non-exempt employees that is includable in the regular rate of pay:

  • On-call pay
  • Bonuses promised for good attendance, continuation of the employment relationship, incentive, production, and quality of work
  • Employee lunch or meal expenses paid by the employer, unless the expense is incurred on the employer’s behalf or for the employer’s benefit (e.g., dinner money while working late or meal expenses while out of town on business)
  • Salaries
  • Salary increases, including retroactive increases
  • Shift differentials, hazardous duty pay and longevity pay
  • Travel expenses of employees going to and from work, if they are paid by the employer

The regular rate of pay and overtime must be calculated prior to making deductions from wages, such as deductions for charitable contributions by the employee, garnishments, insurance premiums paid for the employee’s convenience, re-payment of salary advances, withholding taxes for or on behalf of the employee, health plan contributions, and voluntary wage assignments.

The FLSA does not require employers to pay employees on an hourly basis. Their earnings may be determined on a daily rate, salary, commission, or some other basis, but in such case the overtime pay due must be computed on the basis of the hourly rate derived from such earnings. The regular hourly rate of pay of an employee is determined by dividing the total remuneration for employment (except the statutory exclusions) in any workweek by the total number of hours actually worked in the workweek. A few examples will illustrate the application of this principle in particular instances.