Overtime Pay: Calculating Your Regular Rate Of Pay

Employees are entitled to premium pay for overtime: an additional 50% of their regular rate of pay for every overtime hour worked (called “time and a half”).

If you are eligible for overtime, you are entitled to an overtime premium of 50% of your regular hourly rate for every overtime hour worked. This premium is commonly called “time and a half,” because you get one and a half times your hourly rate. If you always earn the same amount per hour, and you don’t receive any extra compensation, it’s easy to calculate your overtime pay. For example, if you earn $16 an hour, your overtime rate is $24.

If you aren’t paid on an hourly basis, however, or your pay includes bonuses, commissions, and so on, calculating the hourly rate is more of a challenge.

You Can Be Eligible for Overtime Even if You’re Not Paid By the Hour

If you are eligible for overtime (that is, you are nonexempt), it doesn’t matter whether you are paid by the hour, paid a salary, earn commissions, get a piece rate, or are paid in any other way. You are entitled to time and a half for overtime hours.

What Counts as Compensation?

Your regular rate of pay includes all compensation for your work, such as wages, commissions, performance-based bonuses and prizes, and shift differentials. It doesn’t include money or items that aren’t intended as part of an employee’s pay, such as expense reimbursements, discretionary bonuses, or gifts from an employer (such as holiday bonuses). It also doesn’t include overtime pay.

Your regular rate of pay is calculated by adding up your entire compensation for the week and dividing by the total number of hours your worked.

Example: Rick works at a call center for a software company. In one week, he works 45 hours, for which he is paid ten dollars an hour, or $450. His employer pays a $50 bonus each week to the employee who earns the highest customer satisfaction ratings in the week. Rick earned the bonus this week, so his total compensation is $500. His hourly rate for the week is $500 divided by 45 hours, or $11.11 an hour. He is entitled to an additional $27.78 in overtime pay: half of his $11.11 rate of pay times five hours. If Rick hadn’t received the bonus, he would be entitled to $25: half of his regular $10 hourly rate times five hours.

If You Are Paid a Salary

If you are paid an annual salary, you can convert it to a weekly amount by dividing it by 52. For example, if you earn $52,000 per year, your weekly salary is $1,000.

To calculate your hourly rate, you divide your weekly salary (plus any bonuses or other compensation that must be counted, as explained above) by your hours worked. For example, if you work 50 hours and your weekly salary is $1,000, your regular hourly rate for the week is $20. (This is the calculation under federal law; some states don’t require employees to use the total hours actually worked, but instead to use 40 hours per week. This results in a higher rate of pay and a higher overtime premium.)

If You Are Paid a Piece Rate

Employees who earn a piece rate — for example, $2 for every toy kit assembled — will have a variable hourly rate, depending on their speed. To find the rate for any given week, divide the total amount earned by the number of hours worked. For example, if an employee worked 50 hours and assembled 600 kits, the employee earned $1,200 for the week. The employee’s hourly rate is 1,200 divided by 50 hours, or $24 an hour.

If You Are Paid a Commission

If you are paid by commission, the same rule applies: Divide your compensation for the week by the hours you spent earning it. For example, if you receive a 5% commission on sales, and you sell $40,000 in products in a week, your weekly compensation is $2,000. If you worked 50 hours that week, your regular rate of pay is $40 an hour.

Getting Legal Help

If you believe your employer has erroneously classified you as exempt from (not entitled to earn) overtime, or you believe your overtime pay is too low based on the calculations above, consider a consultation with an employment lawyer. Overtime rules are complicated, and an experienced attorney can assess whether your employer is following the law. If not, an attorney can help you sort through your options and decide how to proceed.

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