Calculating Employees' Regular Rates

If your employees are nonexempt, in the process of paying them, you must first determine how many hours the employee has worked. Once you've done that, if your employees are paid by the hour, you know how much to pay: the employee's hourly rate multiplied by the number of hours up to 40, plus one and one-half times the hourly rate for the number of hours over 40.

But if your employees are paid on some other basis but are still entitled to overtime because they worked more than 40 hours and are nonexempt, you will have to figure out what their "regular rate" is, unless they fall under one of four narrow exceptions.

 
Warning

Calculating the regular rate is complicated and time-consuming. We recommend that you avoid this problem by paying all your nonexempt employees on an hourly wage basis.

What is the "regular rate?" Loosely speaking, an employee's regular rate is his or her straight-time earnings converted to an hourly figure. Technically speaking, the regular rate is the employee's total weekly remuneration for employment, less statutory exclusions, divided by the total weekly hours worked for which such remuneration was paid.

The regular rate is computed before any kind of payroll deduction is made. Regular rates are not based on take-home pay.

Regardless of how you pay employees hourly, by piece, monthly the rate must not fall below the minimum wage rate of $5.15 per hour.

How do you calculate an employee's regular rate? For employees who are paid hourly and work a 40-hour workweek, the calculation is simple and corresponds to the hourly rate of pay that you agree to pay them. However, when employees are not paid on an hourly basis, but instead are salaried or work on a piece rate basis, calculating the regular rate becomes more involved.

To figure out an employee's regular rate, use this formula:

amount of pay for a workweek divided by number of hours worked (not including overtime)