What Is My Overtime Rate?

Fair Labor Standards Act

This is a question that most workers need to ask much more frequently.  Most employees believe that their overtime rate should be 1.5 times their hourly rate.  However, the Fair Labor Standards Act requires that covered employees receive an overtime rate of 1.5 times their “regular rate,” and makes no mention of an “hourly rate.”  For workers who are paid only an hourly rate and do not receive other forms of compensation, their hourly rate is their “regular rate.”  However, for employees who are compensated with a commission, bonus, piece rate, day rate or salary, the “regular rate” is more difficult to determine.

Generally, a worker’s regular rate may be determined by dividing all compensation earned in a workweek by the number of hours worked.  As you can see, for an employee who receives an hourly rate, plus a commission, the regular rate would be higher than the hourly rate, because the commission would be distributed over all the hours worked during the week.  For example, an employee who worked 10 hours at $10 per hour and received a weekly bonus of $100, would have a regular rate of $20 per hour (($10 hourly rate) + ($100 bonus / 10 hours) = $10 hourly rate + $10 bonus rate = $20/regular rate).  Many workers who receive an hourly rate, plus commission or bonus, are not being properly compensated because their employer fails to take into account the increase in the regular rate that is attributable to the earning of the commission or the bonus.  As most workers do not realize that their overtime pay should include increases as a result of such additional compensation, they continue to be underpaid without even knowing it.

Understanding your rights is the first step towards protecting yourself from a wage violation.  Therefore, if you have questions, contact an experienced wage and hour law attorney to find out about your rights and determine whether you have been properly compensated.