Definition
The regular rate of pay is the hourly rate used to calculate overtime under the Fair Labor Standards Act. It includes all job-related compensation except specific statutory exclusions and is found by dividing total weekly earnings by actual hours worked. Overtime is owed at no less than one and one-half times this rate.
Also known as: regular rate, FLSA regular rate
How it works
Under the FLSA, covered nonexempt employees generally must receive overtime for hours worked beyond 40 in a workweek, at a rate not less than time and one-half their regular rates of pay. The regular rate is not simply the base hourly wage. It encompasses all job-related compensation except the exclusions the statute lists.
To calculate it, divide total weekly earnings that count toward the rate by the actual hours worked. When an employee performs different types of work at different rates in one week, overtime is calculated using the weighted average of those rates.
Overtime cannot be waived by agreement, and hours cannot be averaged across weeks. Payroll systems should therefore capture all earning types, so that overtime is computed on the correct rate each pay period.
Example
A nonexempt technician earns a set hourly wage and receives a job-related bonus in a week with 45 hours worked. Payroll adds the bonus to the week's earnings, divides by 45 to find the regular rate, and pays the overtime hours at one and one-half times that rate.
How it differs from similar terms
Regular Rate of Pay vs Off-Cycle Payroll. The regular rate determines how much overtime is owed, while off-cycle payroll is a timing mechanism for paying corrections outside the normal schedule, such as when the rate was miscalculated.
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Frequently asked questions
What does regular rate of pay mean?
It is the hourly rate the Fair Labor Standards Act uses to price overtime. It counts all pay for the work, not only the base wage, minus the payments the law allows employers to leave out.
How do I calculate my regular rate of pay?
Add up the week's pay that counts toward the rate, then divide it by the hours actually worked that week. The result is the regular rate. If you did different jobs at different rates, the rate is the weighted average of those rates.
What is time and a half of the regular rate?
It is the overtime pay floor: each overtime hour must be paid at no less than one and one-half times the regular rate. Because the regular rate can include bonuses and other pay, time and a half is often more than one and one-half times the base wage.
What pay can be left out of the regular rate?
Only the types the law lists. They include true gifts, pay for vacation, holidays and sick leave, reimbursed business expenses, discretionary bonuses, profit-sharing payments and employer contributions to benefit plans. Pay tied to hours, work or performance must be counted.
Can overtime be averaged over two weeks?
No. Overtime is worked out one workweek at a time, and hours cannot be averaged across weeks. Employees also cannot waive overtime by agreement.
What is an example of the regular rate of pay?
Take a nonexempt employee paid by the hour who works more than 40 hours in a week and also earns a non-discretionary production bonus. Add the bonus to the straight-time pay for every hour worked, divide that total by all the hours worked to get the regular rate, then pay each overtime hour an extra half of the regular rate on top of the straight-time pay already counted. A bonus therefore raises the overtime owed for that week.
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