The amount of overtime compensation due to an employee under the FLSA is based, in part, on the employee’s regular rate of pay. The regular rate is calculated by dividing the total compensation for employment earned in any workweek—except for certain statutory exclusions—by the total number of hours actually worked. The regular rate calculation is based upon actual facts and cannot be circumvented by an agreement.
Importantly, there are specific statutory exclusions that do not have to be included in the regular rate when calculating overtime. These include, for example, gifts and payments in the nature of gifts on special occasions; payments for occasional period when no work is performed due to vacation, holidays, or illness; reimbursable business expenses; discretionary bonuses; and premium payments for non-FLSA overtime, among other categories of payments. Unless specifically noted, payments that are excludable from the regular rate may not be credited towards overtime compensation due under the FLSA. Additional information regarding the regular rate and exclusions may be found in the regulations in the Department of Labor’s Fact Sheet #56A.
