By Steve Kania, Vice President of Product Management, SurePayroll
The first thing to know about the regular rate of pay is that it needs to be at or above the minimum wage. Non-exempt employees must be paid at least the applicable minimum wage for all hours worked up to 40 in the workweek and receive one and one-half times their regular rate pay for all hours worked over 40 in the workweek.
To calculate the regular rate, you take all of an employee’s pay for the workweek and divide it by the number of hours worked in the workweek.
Sounds simple enough, but as an accountant, you should be aware there are a number of exclusions to the regular rate of pay including:
• Reimbursed business expenses
• Overtime in excess of FLSA requirements*
• Employer benefit plan contributions
• Vacation/holiday/sick pay for unworked hours
• Discretionary bonuses
• Stock options
The regular rate does include:
• Pay for all hours worked
• Nondiscretionary bonuses, i.e., attendance bonus, production bonus
• Fair market value of noncash compensation
• Shift premiums
• Cost-of-living adjustments
• Retroactive pay
• All payments not specifically excluded by law
Keep this handy list in mind when consulting with clients on how to find the regular rate of pay for purposes of calculating overtime rates.