Regular Rate

The regular rate is the figure that drives almost every FLSA overtime calculation, and it's the figure most often computed wrong. Employers commonly assume regular rate equals base hourly wage, but the FLSA defines it as total compensation (with specific exclusions) divided by total hours. That means a $20/hour employee earning a $100 weekly attendance bonus has a regular rate higher than $20, and overtime gets calculated on the higher figure. DOL wage-and-hour enforcement actions routinely cite regular rate miscalculation as the underlying violation.

What Goes Into the Regular Rate

Base hourly wages. Non-discretionary bonuses (production, attendance, longevity). Commissions. Shift differentials. Hazard pay. Most non-cash compensation at fair market value.

What's Excluded From the Regular Rate

Discretionary bonuses (truly discretionary, not regularly expected). Gifts on special occasions. Reimbursements for actual expenses. Premium pay for working outside standard hours (in some cases). Health insurance and retirement contributions. The 2020 DOL final rule clarified several exclusions.

How Regular Rate Calculation Actually Works

Total includable compensation divided by total hours worked in the workweek equals the regular rate. Overtime is then 1.5 times that rate for hours over 40. Example: $20 base for 45 hours plus $50 non-discretionary bonus = ($20 x 45 + $50) / 45 = $21.11 regular rate; overtime premium = ($21.11 x 0.5) x 5 = $52.78 for the 5 OT hours.

Getting Regular Rate Right Across Your Payroll Operations

Configure payroll to include all required compensation in regular rate. Audit overtime calculations against bonus weeks. Train payroll staff on what's discretionary vs. non-discretionary. See hours worked for the hours side and compensation for broader strategy.