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.

Hours Worked

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.

Total Wages

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.

Previous SIMA Payroll News:

Form I-9 Remote Verification and Other Flexibilities End on July 31, 2023

DOL Updates Construction Worker Wages Under the Davis-Bacon Act and Related Acts

DOL Publishes FLSA Overtime Rule With Higher Salary Levels for White Collar Employees

Disclosures: This content is not intended to be exhaustive, nor should it be viewed as legal or tax advice. Information presented is believed to be current and is provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of this information. It is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid any penalties. You should always consult an attorney or tax professional regarding your specific legal or tax situation. This information may change at any time and without notice. All opinions represent the judgment of the author on the date of the post and are subject to change. Content should not be viewed as personalized advice. SIMA reserves the right to edit blog entries and delete comments that contain offensive or inappropriate language. ©2023 Zywave, Inc. All rights reserved.

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