The definition of “regular rate” — a building block in calculating overtime for nonexempt employees — is technical, but understanding it can help prevent class actions and keep labor costs in check.
Before implementing any new compensation programs, HR professionals should consider the potential impact on the regular rate and resulting overtime rates, which can significantly increase labor costs, said Chris Coyne, an attorney with Epstein Becker Green in New York City.
“The regular rate of pay is the weighted average of most forms of compensation paid to a nonexempt employee for work performed in a workweek, except for statutory exclusions,” said Timothy Rusche, an attorney with McGuireWoods in Los Angeles. “A number of different types of remuneration must be factored into the regular rate, including certain bonuses, commissions, and shift differentials.”
Determining how to calculate the regular rate and the forms of remuneration to include in the regular rate can be tricky, he added.
“The regular rate is the basis upon which an employee’s overtime rate is calculated,” Coyne said. The regular rate can vary week to week and may be impacted by generous compensation programs.
“As such, it must be a consideration when developing compensation systems, bonus programs, or employee incentive plans to ensure employers are accurately anticipating the impact and cost of these programs and are ready to implement any necessary changes in their payroll systems,” he...
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