Paying overtime seems simple-hourly non-exempt employees are paid either 1.5x or 2x their rate of pay for overtime hours worked. However, in reality, calculating overtime is more complex as the overtime rate is not based on the “hourly rate of pay,” but instead must be calculated based on the “regular rate of pay.”

The “regular rate of pay” includes other forms of compensation paid to an employee and may fluctuate each work week and each payroll period. The following additional forms of compensation must be included when calculating the “regular rate of pay”:

  • Bonuses (Production or Non-Discretionary, or Flat Rate)
  • Shift Differentials
  • Piece Rate pay
  • Commissions

The following payments are not included in calculating the “regular rate of pay”:

Time paid but not worked (e.g., vacation, holidays, sick leave, reporting time, split shift pay, and extra hour premium pay for failure to provide meal or rest breaks.)

  • Discretionary bonuses
  • Gifts such as holiday gift
  • Tips
  • Retirement plan contributions
Calculating the Regular Rate of Pay Examples:

Production Bonus:  which is based on the employees production or other predetermined formula.

First determine the overtime due on the regular hourly rate and then separately compute the overtime due on the bonus. The regular rate is determined by dividing the bonus by the total hours worked (including overtime hours) during the period to which the bonus applies.

The overtime pay on the bonus is then calculated by multiplying one-half of this regular bonus rate by the number of overtime hours worked during the period in which the bonus was earned (or multiplying by one for double time hours).


  • Hourly rate of pay = $16 hour
  • Total hours in the workweek = 52
  • Total overtime hours at time and one-half = 12
  • Overtime due on regular hourly rate = 12 x $24 (time and one-half) = $288
  • Bonus attributable to the workweek = $150
  • Regular bonus rate = $150 divided by 52 = $2.885 x .5 = $1.442 x 12 overtime hours = $17.31

Total earnings due for the workweek:

  • Straight time: 40 hours at $16/hour = $640
  • Overtime: 12 hours at $24 an hour = $384
  • Bonus: $150
  • Overtime on bonus: $17.31
  • Total: $1,095.31 ($640 +$288 + $150 + $17.31)

Flat-Sum Bonus

Employers must divide the employee’s bonus by the employee’s non-overtime hours worked (not by the total hours worked). This provides the per-hour value of the bonus, which is multiplied using 1.5 for time and a half and 2.0 for double time.


  • Hourly Rate of Pay: $16
  • 50 hours in a workweek (40 hours of straight time and 10 hours of overtime).
  • $20 flat-sum bonus for working a weekend shift.

The employee’s wages for the week would be calculated as follows:

  • Total non-overtime hours worked: 40
  • Flat-sum bonus attributable to the workweek: $20
  • Per hour value of bonus: $20 bonus ÷ 40 regular hours = $0.50
  • Overtime value of the bonus: $0.50 x 1.5 = $0.75 x 10 overtime hours = $7.50

Total earnings due for the workweek:

  • Straight time: 40 hours at $16/hour = $640
  • Overtime: 10 hours at $24/hour = $240
  • Bonus: $20
  • Overtime on bonus: $7.50
  • Total wages: $90750 ($640 + $240 + $20 + $7.50)

Regular Rate When Commissions Are Paid

Divide the total earnings for the week, including earnings during overtime hours, by the total hours worked, including overtime hours.

For example:

  • 45 hours worked
  • $900 earned in commissions

The regular rate based on earned commissions is calculated as follows:

  • Total earnings of $900 divided by 45 hours (inclusive of overtime hours worked) equals a regular rate of $20.
  • For each overtime hour worked, the employee is entitled to an additional one-half the regular rate (when owed time and one-half) or to an additional full rate (when owed double-time).


Failure to pay the regular rate of pay as opposed to the base or hourly rate can expose an employer to substantial liability for failure to pay overtime, failure to pay wages when due and failure to provide accurate wage statements. Each of these violations carry a penalty per pay period for each employee.

This Newsletter is intended as a brief summary of employment law. While every effort has been made to ensure the accuracy of the information contained herein, it is not intended to serve as “legal advice,” or to establish an attorney-client relationship. If additional information is needed on any of the topics contained herein, please contact our office. All rights reserved. ©2024.

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