Regular Rate of Pay: Definition, Formula, and Overtime Examples
The regular rate of pay is the hourly rate the FLSA uses to compute overtime, calculated by dividing all compensation for the workweek (including nondiscretionary bonuses, shift differentials, and commissions, but excluding gifts, discretionary bonuses, PTO pay, and expense reimbursements) by total hours worked.
The regular rate of pay is the hourly figure on which overtime is calculated, and it is usually not the same as the hourly wage in the offer letter. Under the Fair Labor Standards Act (FLSA), the regular rate is total compensation for the workweek divided by total hours worked, after removing a short list of statutory exclusions. Because it includes bonuses, differentials, and commissions, an employer that pays overtime on the base wage alone is systematically underpaying every employee who earns anything extra.
What Is the Regular Rate of Pay?
The DOL's Fact Sheet #56A gives the formula as "Total compensation in the workweek (except for statutory exclusions) ÷ Total hours worked in the workweek = Regular Rate." The rate is recomputed every workweek, because the compensation and the hours change every week. For an employee paid a flat hourly wage and nothing else, the regular rate equals the wage. For nearly everyone else, it is higher.
The rule exists to stop employers from moving pay out of the hourly wage and into "bonuses" to shrink the overtime base. The FLSA treats almost every form of pay tied to work as part of the rate.
What Goes In and What Stays Out
Fact Sheet #56A states that "all compensation for hours worked, services rendered, or performance must be included in the regular rate," then lists the exclusions Congress allowed.
| Included in the regular rate | Excluded from the regular rate |
|---|---|
| Hourly wages and salary | Discretionary bonuses (both the fact and the amount are at the employer's sole discretion, decided at or near the end of the period) |
| Nondiscretionary bonuses (attendance, production, quality, retention, promised in advance) | Gifts and special-occasion payments not tied to hours, production, or efficiency |
| Shift differentials | Paid time off: vacation, holiday, sick leave, and other PTO pay |
| Commissions | Reimbursement of actual business expenses |
| On-call pay when the employee is required to be available | Premium pay for weekend or holiday work at 1.5× or more |
| Wage supplements tied to hours of employment | Overtime premiums themselves (the extra half) |
The most common mistake is misclassifying a bonus as discretionary. A bonus announced in advance for hitting a quality score, showing up every day of the month, or staying through peak season is nondiscretionary, because the employee was promised it if a condition was met. It must be included in the regular rate for the weeks it covers, even if it is paid quarterly. When a bonus covers several weeks, it is apportioned back across those weeks and additional overtime is paid retroactively.
A Worked Example: Differential and Bonus
A contact-center agent in a BPO earns a $19.00 base rate. In one workweek she works 46 hours, 20 of which are evening hours that carry a $1.50 shift differential, and she earns a $50.00 weekly attendance bonus announced in the handbook.
Step 1: total compensation before overtime
- Base: 46 × $19.00 = $874.00
- Differential: 20 × $1.50 = $30.00
- Attendance bonus: $50.00
- Total: $954.00
Step 2: regular rate
- $954.00 ÷ 46 hours = $20.74 (rounded to the cent)
Step 3: overtime premium
- The 46 hours have already been paid at straight time inside the $954.00, so only the extra half is owed on the 6 overtime hours
- 6 × ($20.74 × 0.5) = 6 × $10.37 = $62.22
Step 4: gross pay
- $954.00 + $62.22 = $1,016.22
Had payroll computed overtime on the $19.00 base alone, the premium would have been 6 × $9.50 = $57.00, a $5.22 shortfall. That looks trivial until it is multiplied across 300 agents and a two-year statute of limitations, plus an equal amount in liquidated damages. See Gross Pay for how the gross figure then flows through deductions.
Blended Overtime Rate for Two Job Rates
When an employee works two jobs at different rates in the same week, the regular rate is the weighted average, often called the blended rate. A remote team member works 30 hours as a support agent at $18.00 and 14 hours as a QA reviewer at $24.00, for 44 total hours.
- Earnings: (30 × $18.00) + (14 × $24.00) = $540.00 + $336.00 = $876.00
- Blended regular rate: $876.00 ÷ 44 = $19.91
- Overtime premium: 4 × ($19.91 × 0.5) = 4 × $9.955 = $39.82
- Gross: $876.00 + $39.82 = $915.82
The FLSA does allow the parties to agree in advance to pay overtime at the rate of the job being performed during the overtime hours instead of the blended rate, but the agreement must be made before the work is done. Without it, the weighted average applies.
Regular Rate for Salaried Non-Exempt Employees
A salary does not make an employee exempt; the duties and salary tests in the DOL's Fact Sheet #17G do. A non-exempt employee paid $800.00 a week for a 40-hour schedule has a regular rate of $800.00 ÷ 40 = $20.00, and each overtime hour is owed at $30.00. If the salary is understood to cover all hours worked in a fluctuating schedule, a different method applies in which the regular rate falls as hours rise and only the half-time premium is owed, but that method has strict conditions and several states restrict it. Read Exempt vs Non-Exempt Employees before assuming a salary avoids overtime.
State definitions can differ
California, for example, requires that a flat-sum bonus "be divided by the maximum legal regular hours worked in the bonus-earning period, not by the total hours worked," according to the DLSE overtime FAQ, which produces a higher regular rate than the federal method. Confirm the calculation with the U.S. Department of Labor or your state labor agency, and see the state labor law guides for daily overtime rules that change which hours carry the premium.
Regular Rate of Pay in Contact Centers and Remote Teams
Contact centers are regular-rate minefields because agent pay is built from layers: base rate, evening or weekend differential, language premium, attendance bonus, CSAT bonus, and referral bonus. A 250-seat outsourced center paid overtime on base rate for three years, treating its monthly CSAT bonus as discretionary because the amount varied. The bonus was announced in advance with a published scale, so it was nondiscretionary. Apportioning it back across each month's workweeks and recomputing the overtime premium produced an average correction of about $6.00 per agent per week, which across 250 agents and 156 weeks came to roughly $234,000 in back wages before liquidated damages. The center now runs the regular-rate calculation automatically each week from time records that separate differential hours from base hours.
Remote teams paid partly by commission face the same rule. A remote inside-sales representative who is non-exempt and works 45 hours in a week with $600.00 in commissions must have those commissions in the regular rate for that week's five overtime hours.
How to Track the Regular Rate
The regular rate cannot be calculated without accurate weekly hours and a breakdown of which hours carried which pay. HiveDesk's automatic time tracking records every hour with a timestamp, so evening and weekend hours that earn a differential are identifiable rather than estimated. Timesheets total hours per workweek, the denominator in the formula, and can be approved by a manager before payroll runs. Task and project tracking lets an employee's hours be tagged to different roles, which is the data needed for a blended rate when two jobs pay differently. Attendance records support attendance bonuses, and reports export the hours by category to whatever payroll system applies the rates. All of it is included at $5/user/month with a 14-day free trial.
Weekly Hours by Rate, Ready for Payroll
HiveDesk timestamps every hour and totals them by workweek and by task, so differential hours, second-job hours, and total hours worked are all available for the regular-rate calculation. $5/user/month, 14-day free trial.
Related Terms
- Hours worked: the denominator of the regular-rate formula
- Workweek: the period the rate is computed for
- Double time: a 2× multiple of the regular rate in California
- Comp time: paid out at the higher of the final or three-year average regular rate
- Shift differential pay: the most common addition to the rate
- Time and a half calculator: apply 1.5× to the rate you have computed
Frequently Asked Questions
Is the regular rate of pay the same as the hourly rate? Only for employees who receive nothing but a flat hourly wage. Any nondiscretionary bonus, shift differential, commission, or on-call pay raises the regular rate above the hourly wage for that week.
Are bonuses included in the regular rate? Nondiscretionary bonuses are. These are bonuses promised in advance for meeting a condition such as attendance, production, or quality. Truly discretionary bonuses, where both the decision to pay and the amount are at the employer's sole discretion, are excluded.
Is PTO pay included in the regular rate? No. Payments for time not worked, including vacation, holiday, and sick pay, are excluded. Those hours are also not counted as hours worked in the denominator.
How do you calculate a blended overtime rate? Add all straight-time earnings from every job or rate in the week, divide by total hours worked to get the weighted regular rate, then pay half of that rate as the premium on each overtime hour, since the straight-time portion has already been paid.
Does a quarterly bonus affect overtime already paid? Yes. A nondiscretionary bonus that covers several workweeks is apportioned back across those weeks, and additional overtime premium is owed on the increased regular rate for each week that had overtime.
What is the regular rate for a salaried non-exempt employee? Divide the weekly salary by the number of hours the salary is intended to cover, typically 40. Each overtime hour is then paid at 1.5 times that rate.
Browse more workforce management terms in the glossary.