HOW DO YOU CALCULATE THE REGULAR RATE OF PAY AND OVERTIME?

Overtime is based on the regular rate of pay and the regular rate of pay includes all renumeration. In order to determine how much overtime compensation, the employee is entitled to we need to calculate the regular rate of pay. The regular rate of pay depends on how the employee is paid (hourly; hourly plus extra pay; salary; piece rate; or commission):  

Renumeration that must be included in calculating the regular rate of pay includes: 

Shift differential [Extra compensation for employees who work a less desirable shift, such as a graveyard shift]

Non-discretionary bonuses [Bonus based on incentive] such as:

• Attendance bonus.
• Sales bonus.
• Performance bonus.
• Sales bonus.
• Safety bonus.

What is a bonus? A bonus is money promised to an employee in addition to the employee’s hourly rate of pay, salary, commission, or piece rate.  Some bonuses are based on contract, such as good attendance or meeting sales quota (.e. Non-discretionary Bonus) and some bonuses are paid even when there is no promise for payment (i.e. Discretionary Bonus).

Commissions.

What is a Commission?  A commission is compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof. Commissions arise from the sale of a product or service but not the making of a product. In order to be a commission, the compensation must be a percentage of the price of the product or service sold. If the employee receives a set amount for each item sold or service rendered, such wages are likely not commissions. 

Mandatory service charges [Money that a patron is required to leave] [A tip is not a mandatory service charge since it is not required but optional]

On-call pay.

Housing benefits.

Renumeration that does not need to be included in calculating the regular rate of pay includes: 

• Gifts [Christmas or Birthdays presents].
• Vacation pay, Holiday pay or Sick Pay.
• Reimbursement for Expenses.
• Discretionary Bonuses [Bonuses which are completely discretionary, based on no objective criteria and are not routine].
• Profit sharing plans.
• Third-party contributions such as employer contributions to 401(K) or  health insurance.
• Overtime compensation. 
• Meal and rest break premiums.
• Reporting time pay.
• Split shift premiums.
• Certain types of stock options.
• Tips.

WHAT IS REGULAR RATE OF PAY FOR HOURLY PAID EMPLOYEE (WITHOUT ANY EXTRA PAY)?

STEP 1: Calculate the regular rate of pay. The regular rate of pay is the same as the hourly rate of pay. 

For example if Bill is paid $10.00 per hour, then his Regular Rate of Pay is $10.00 per hour and his overtime rate is $15.00 per hour ($10.00 x 1.5) and his double time rate of pay is $20.00 per hour ($10.00 x 2)

What is The Labor Commissioner’s Opinion

WHAT IS REGULAR RATE OF PAY FOR HOURLY PAID EMPLOYEE (WITH RENUMERATION)?

STEP 1: Calculate the regular rate of pay. The regular rate of pay is the same as the hourly rate of pay plus all renumeration.

REGULAR RATE OF PAY = The employee’s hourly rate of pay plus all renumeration

The amount of extra remuneration must be divided by the total number of hours worked in the workweek and then added to the hourly rate to calculate the regular rate of pay. 

What is The Labor Commissioner’s Opinion

WHAT IS THE REGULAR RATE OF PAY FOR SALARY NON-EXEMPT EMPLOYEE?

STEP 1: To calculate the regular rate of pay, one must first calculate the weekly salary.

WEEKLY SALARY = Multiply the monthly salary by 12 months and divide that number by 52 weeks.

STEP 2: Calculate the regular rate of pay. Divide the weekly salary by 40 hours.

REGULAR RATE OF PAY = Divide the weekly salary by 40. 

REGULAR RATE OF PAY FOR PAID PIECE RATE OR A COMMISSION EMPLOYEES

STEP 1: Calculate the regular rate of pay. The regular rate of pay is the total earning by the employee divided by the total number of hours worked in the workweek. 

REGULAR RATE OF PAY = Divide the total earnings for the workweek, including earnings during overtime hours, by the total number of hours worked that workweek. 

 [RULE]: Employers who pay their workers by commission or piece work rather than an hourly wage or salary must ensure that the employee’s compensation averages at least the minimum wage during each pay period.  If the average compensation falls below the minimum wage, the employer must pay the difference.

[RULE]: Piece rate and commission employees must be paid separately for rest breaks and non-productive time. 

What is The Labor Commissioner’s Opinion