What Is Regular Rate of Pay?
Regular rate of pay is a legal term from the Fair Labor Standards Act, and it's the number used to figure out how much overtime a non-exempt employee is actually owed. It's not automatically the same as their hourly wage, which trips a lot of employers up.
To calculate it, you take an employee's total compensation for the week, minus a few specific exclusions, and divide by hours worked. That figure becomes the base for the overtime premium, paid at 1.5 times the regular rate for anything over 40 hours. The catch is what counts toward that total. Non-discretionary bonuses and shift differentials generally have to be included. Discretionary bonuses and expense reimbursements generally don't.
For Example: An employee working in a restaurant will get their wages on a per-hour basis and an additional attendance incentive per week. Such an incentive has to be incorporated into the regular rate for computing overtime, making the overtime rate much higher than would have been computed using a simple hourly wage. This works the same for manufacturing employees' night shift pay, retail workers earning commission, and healthcare staff getting on-call premiums; they all run into the same issue.