Understanding and correctly computing the regular wage rate is crucial for complying with federal wage payment laws. It is important for employers to know how to calculate the pay of both hourly and salaried employees to make sure their employees are getting paid correctly.
Regular rate of pay
To determine an employees’ regular rate for a certain work period, employers need to divide the total earnings of the employees for a given workweek by the number of hours worked within that same workweek.
A non-exempt employee’s regular rate of pay is used to calculate overtime. This means that if an employee receives pay outside of their normal hourly or salary rate during a week that includes overtime, these amounts need to be added in when determining the employee’s regular rate of pay and in turn the overtime pay rate.
The FLSA requires that employers compensate their nonexempt employees for every hour they are “suffered or permitted to work.” These hours are referred to as “work hours” or compensable time. Compensable time encompasses all hours that a nonexempt employee is on standby for the next assignment, and when employees are actively involved in productive tasks.
Total wages include all forms of compensation. This includes commission pay and bonuses. It is important for employers to make sure that commission wages are included in the pay period that they were earned. If an employer is unable to link a commission pay to a specific period, then they need to treat it as a bonus when they calculate the regular rate.
Calculating pay for salaried employees
Remember that not all salaried employees qualify to be exempt from overtime under the FLSA, so there may be times when you will need to calculate the regular pay rate of a salaried employee as well. To determine the regular pay rate for salaried non-exempt employees, divide the weekly salary of the employee by the actual hours worked. If there are any bonuses or commissions for the period, then add them before calculating the regular rate.
Accurately paying employees is not only a legal requirement for employers, but all ensures your employees feel appreciated for their work.