Pay Excluded from the Regular Rate

If you pay your nonexempt employees on an hourly rate basis, their "regular rate" is the amount of the hourly wage you've agreed to pay them. We recommend that you pay all nonexempt workers at an hourly rate.

If you don't take our advice and insist on paying them at a piece rate, weekly rate, or some other basis, you'll still need to determine their regular hourly rate of pay for purposes of determining whether you're following the minimum wage and overtime pay laws.

Determining the regular rate is not always as easy as dividing weekly earnings by weekly hours worked. Why? Because some types of pay shouldn't be counted toward weekly earnings.

That's both good news and bad news for you. The bad news is that reducing the weekly earnings will drive the hourly rate down, thus potentially making it more difficult to meet the minimum wage requirements. On the other hand, reducing the hours worked will possibly reduce the overtime you have to pay.

For better or worse, there isn't much you can do about it. Federal wage and hour law requires you to omit the following items from calculations of an employee's regular rate:

So, in the process of determining what amount of pay you're going to divide the employees number of hours worked into, be sure to exclude any of the payments above.