Regular rate of pay: getting overtime right

Why overtime is not always one and a half times the base rate, and how to calculate the regular rate step by step.

In shortUnder the FLSA, overtime is paid at one and a half times the employee’s regular rate, not just their base hourly rate. The regular rate is all pay for employment in the workweek, minus specific exclusions, divided by total hours worked. Nondiscretionary bonuses, shift differentials, commissions and most premiums are usually included. Pay for time not worked, expense reimbursements, true gifts and discretionary bonuses are usually excluded.

Why the regular rate matters

Many payroll errors come from one assumption: that overtime is always 1.5 times the base hourly wage. That is only true when the base wage is the only pay. As soon as an employee earns a production bonus, an attendance bonus, a night differential or a commission, the regular rate goes up, and so does the overtime premium. Underpaying by a small amount each week can add up to significant back pay over time. Our glossary entry on the regular rate of pay gives a short definition, and FLSA overtime rules explains overtime more broadly.

The basic formula

Regular rate = (total pay for the workweek, minus excluded payments) / total hours worked in the workweekOvertime premium = 0.5 x regular rate x overtime hours (when straight-time pay for all hours is already included in total pay).

The calculation is always done per workweek, never averaged over two weeks or a pay period.

What is usually included

What is usually excluded

The exclusions are narrow and have detailed conditions. A bonus called “discretionary” is not excluded if employees were told in advance they would receive it for meeting a target.

Example 1: a production bonus

A fictional warehouse associate earns $20 per hour, works 46 hours in a week and earns a $69 weekly productivity bonus announced in advance.

Regular rate with a nondiscretionary bonus
Step Calculation Amount
Straight-time pay 46 x $20 $920.00
Add bonus $920 + $69 $989.00
Regular rate $989 / 46 $21.50
Overtime premium 6 x ($21.50 x 0.5) $64.50
Total pay $989 + $64.50 $1,053.50

If the bonus were ignored, the overtime premium would be 6 x $10 = $60, an underpayment of $4.50 for the week.

Example 2: two different pay rates

When an employee works at two rates in the same week, for example as a cashier at $16 and as a shift lead at $19, the regular rate is usually a weighted average.

Regular rate with two rates (fictional)
Step Calculation Amount
Cashier hours 30 x $16 $480.00
Shift lead hours 14 x $19 $266.00
Total straight-time pay $480 + $266 $746.00
Regular rate $746 / 44 $16.95
Overtime premium 4 x ($16.95 x 0.5) $33.90
Total pay $746 + $33.90 $779.90

Federal rules also allow paying overtime at 1.5 times the rate for the work done during overtime hours, if agreed in advance and certain conditions are met. Rounding here is to the cent for readability.

Bonuses paid after the week ends

Monthly or quarterly bonuses are common. If a nondiscretionary bonus covers several weeks, it must be allocated back over the weeks it was earned, and extra overtime is due for any week with overtime hours. A simple approach is to divide the bonus by the total hours worked in the bonus period and pay an extra half of that amount for each overtime hour in the period. Your payroll provider can usually handle this if you give them overtime hours by workweek, which is why week-level time data matters.

How to get it right in practice

  1. List every type of payment you make to non-exempt employees.
  2. Decide for each one whether it is included in the regular rate, with advice where unclear.
  3. Make sure your payroll provider has the same list and configures it correctly.
  4. Keep hours by workweek, including overtime hours, for every employee.
  5. For period bonuses, keep the overtime hours for each week in the period so the bonus can be allocated.
  6. Audit a few paychecks each quarter by recalculating them by hand.

Clean hours make the math work

Every regular rate calculation starts with total hours worked in the workweek. If hours are missing, rounded unfairly or edited without a record, the calculation is wrong before it starts. EZTime records every punch, shows overtime building up during the week and exports approved hours by workweek, ready for your payroll provider to apply your pay rules. Our overtime calculator helps with quick checks.

Frequently asked questions

Is overtime always 1.5 times the hourly wage?

No. It is 1.5 times the regular rate, which can be higher than the base hourly wage when bonuses, differentials or commissions are paid.

Are bonuses included in the regular rate?

Nondiscretionary bonuses, such as those promised for meeting targets or for attendance, are generally included. Truly discretionary bonuses and gifts are generally excluded.

Is holiday pay included in the regular rate?

Pay for a holiday not worked is generally excluded. Premium pay of at least 1.5x for working on a holiday is also generally excluded and can count toward overtime.

How do I calculate overtime with two pay rates?

Usually by using a weighted average of the rates for the workweek, or, if agreed in advance, the rate for the work performed during the overtime hours.

What if a bonus is paid quarterly?

Allocate it over the weeks in which it was earned and pay additional overtime for weeks with overtime hours.

Where to go next

Keep reading

Labor rule alerts

Set overtime thresholds and weekly hour limits in EZTime and managers get an alert while there is still time to change the schedule. Pricing starts from $2 per employee a month, and the smallest accounts pay a $20 monthly minimum.

Disclaimer: This guide is general information only and is not legal, payroll or tax advice. Federal, state and local rules vary and change over time, so check current requirements with the Department of Labor, your state labor agency or a qualified attorney or payroll professional before making decisions. Examples are fictional.