The Fair Labor Standards Act (FLSA), mandates that covered, non-exempt employees must be paid at a rate equal to one and one-half the regular rate of pay for all hours worked over forty in any given workweek.
Compliance with the overtime laws is determined by workweek and each workweek stands by itself. A workweek is defined as 7 consecutive, 24-hour periods (168 hours), but which 7 consecutive days can be chosen by the employer.
The regular rate of pay is determined by dividing total earnings in the workweek by the total number of hours worked in the workweek. The regular rate can never be less than the applicable minimum wage. Not everything, though, is included in the calculation of the regular rate. Excluded from the calculation are:
- Sums paid as gifts;
- Payments for time not worked;
- Reimbursement for expenses;
- Discretionary bonuses;
- Profit-sharing plans;
- Retirement and insurance plans;
- Overtime premium payments; and
- Stock options.
To determine the regular rate (RR), take the total straight-time earnings (make sure to exclude any of the above) and divide it by the total hours worked. The overtime rate is calculated at a rate equal to the regular rate multiplied by .5. The overtime rate is then multiplied by the number of overtime hours worked. This amount is the total overtime premium due. Three examples follow, below.
Example 1: Hourly Rate and Production Bonus
Total Hours + 48 Hourly Rate = $9 Bonus $10
46 hours x $9 =432 + 10 = $442 / 48 = $9.21 (Regular Rate)
$9.21 x .5 = $4.61 x 8 hrs = $36.88 (Overtime Due)
Example 2: Different Hourly Rates
Lifeguard Rate $8.50 Lifeguard Hours 21 = $178.50
Cabana Attendee $9.00 Cabana Attendee Hours 26 = $234.00
Total straight-time earnings = $412.50 / 47 hours = $8.78 (Regular Rate)
$8.78 (Regular Rate) x .5 = $4.39 (Overtime Rate)
$4.39 (Overtime Rate) x 7 hours = $30.73 (Overtime Due)
Example 3: Tipped Employees
Rate Paid by Employer $2.13
Tip Credit Claimed $3.72
Regular Rate: $5.85
Additional Half-Time Rate $2.93
50 Hours $5.85 =$292.50
10 hours x $2.93 =$29.30
Total Due =$321.75 (less tip credit)
Tip Credit 50 x $3.72 =$186.00
Total Cash Wage Due = $135.75
For more about the basics of the FLSA, see: