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Date Posted: 7/31/2013

Determining Overtime: Regular Rate of Pay

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. 


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