BOURGON HR Solution Blog

Payroll Practices: Regular Rate of Pay

Posted by Mike Bourgon on Tue, Sep 30, 2008

Another issue that is litigated with increasing frequency involves the issue of an employee’s “regular rate of pay” used in an overtime calculation. This does not apply to exempt employees and involves extra payments.

In many instances, employers pay attendance bonuses and other non-discretionary bonuses that induce employees to work more steadily or more efficiently or for longer periods of time and are not included in calculation of the employee’s regular rate of pay before overtime pay is calculated.

This is definitely a hot topic because in fact, all compensation that constitutes “remuneration for employment” must be included unless if falls within a very specific statutory exemption.

There has recently been a settlement between the Department of Labor and a major retailer where the retailer failed to include certain non-discretionary payments before computing overtime and allegedly paid millions in order to resolve the issue outside of a court case.

The exemption is very narrowly construed and involves unique one-time only types of discretionary bonus payments such as an annual Christmas bonus that is not certain to occur.