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PSA: If You Are Hourly & Make Bonus/Incentives/Commissions Pay, Make Sure You’re Being Paid Overtime Correctly (a/k/a – Regular Rate of Pay)

Just PSA'ing about the Regular Rate of Pay (RROP). This is a provision of the Fair Labor Standards Act* which stipulates that if you make structured bonuses/incentives/commissions (BIC)**, you are entitled to an increased amount of overtime pay should you work overtime within the pay week that BICs were earned. Lots of companies – especially smaller ones – get this wrong. For Example:Hourly Rate: $15/HourHours in Pay Week: 50BIC: $300 The Correct Way To Pay You:15 * 50hrs = 750 + 300 = $1,050 (This is your total non-premium earnings)$1,050 / 50hrs = $21 (This is your Regular Rate of Pay)$21 * 1.5 = 31.50 – 21 = 10.50 (This is your Overtime Premium Rate)$10.50 * 10 (OT Premium Hours) = 105.00 (OT Premium Total Pay)$1,050 + $105———Total Pay: $1,155 What Companies Who Don't Know (Or Do and Are Wage Thefting You) Calculate:15 * 40hrs = 600 (Regular Pay)21* 10hrs…


Just PSA'ing about the Regular Rate of Pay (RROP). This is a provision of the Fair Labor Standards Act* which stipulates that if you make structured bonuses/incentives/commissions (BIC)**, you are entitled to an increased amount of overtime pay should you work overtime within the pay week that BICs were earned. Lots of companies – especially smaller ones – get this wrong.

For Example:Hourly Rate: $15/HourHours in Pay Week: 50BIC: $300

The Correct Way To Pay You:15 * 50hrs = 750 + 300 = $1,050 (This is your total non-premium earnings)$1,050 / 50hrs = $21 (This is your Regular Rate of Pay)$21 * 1.5 = 31.50 – 21 = 10.50 (This is your Overtime Premium Rate)$10.50 * 10 (OT Premium Hours) = 105.00 (OT Premium Total Pay)$1,050 + $105———Total Pay: $1,155

What Companies Who Don't Know (Or Do and Are Wage Thefting You) Calculate:15 * 40hrs = 600 (Regular Pay)21* 10hrs = 210 (Overtime Pay)+ 300 (BIC)———Total Pay: $1,110

This $45 difference may seem small, but if you've been getting paid incorrectly for a long time, you are entitled to back pay of this amount (usually three years, but varies). Too, if your BICs or overtime hours are large enough, this OT calculation really ramps up. (Note: There are industry exceptions when your total BIC comp reaches a percentage of your gross income – but this is on a pay week basis, it is not something you hit once and no longer qualify for).

If your payroll department doesn't know or isn't sure, they are likely doing this wrong. This should be calculated on a pay week basis unless your BIC payments are not segregated or cannot be calculated by pay week. If they are not, then it should be calculated based on total hours within the range of dates you are receiving BIC payments for.

*https://www.dol.gov/agencies/whd/fact-sheets/56a-regular-rate (formal detail)

**BIC Note: Discretionary (One-Offs like Work Competition, spot bonus, etc.) do not qualify. If you have structured/non-discretionary BICs, they are included.

Source: I've worked in payroll too long.

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