An employee’s regular rate of pay represents the average compensation the employee receives per hour during a workweek. The regular rate of pay can vary from week to week and may be different from the employee’s contractual rate of pay.
Regular Rate of Pay
To calculate an employee’s regular rate for a specific work period, employers must divide the employee’s total wages for a workweek by the number of hours the employee worked during that workweek. Unless an exemption applies, averaging hours over two or more weeks is not permitted.
The Fair Labor Standards Act (FLSA) requires employers to pay their employees for all hours of compensable work. Compensable time is time used in satisfying a principal activity and time spent in any activity that is essential and indispensable to the fulfillment of a principal activity. Employers should carefully consider whether their employees must receive wages for waiting time; on-call time; rest and meal periods; attending lectures, meetings and training periods; or traveling.
An employee’s “total wages” include all forms of compensation given for employment—including bonuses and commission pay—whether paid directly to or on behalf of the employee. Commission wages must be included in the pay period when they were earned, not when they are paid. If an employer cannot tie a commission to a specific period, the employer should treat the commission as a bonus when calculating the employee’s regular rate.
When calculating an employee’s total wages, employers should exclude payments made at the employer’s sole discretion and that are independent of any agreement or promise that may lead employees to expect a payment.
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