Is Your Employer Calculating Your Rate of Pay Correctly?

You deserve to be fully compensated for the hours you work. But you may be losing out on wages that you’ve earned because your employer does not properly calculate your regular rate of pay or your overtime rate.

Many employees understand the general concept that they are entitled to overtime pay at 1.5 times their regular rate of pay. However, they often do not realize all the items that should be accounted for in calculating their regular rate of pay, which is used to determine overtime wages.

Read on for everything you need to know about rate of pay calculations. Many employees also don’t understand when they’re entitled to overtime pay. We cover that issue in a separate blog – click here.

Isn’t My Hourly Rate My Regular Rate of Pay? How Do Other Items Affect My Overtime Rate?

For those paid an hourly rate for work (as many are), that is your regular rate of pay. But your regular rate includes total wages. There are other items, noted below, that are added to your compensation and affect that regular rate of pay.  When that happens, your regular rate of pay increases, and that means your overtime rate (1.5 times that new regular rate) is higher, and so total compensation for overtime hours is higher.

For example, if your regular rate of pay increased from $17/hour to $17.10/hour as a result of adding in the additional items, that means your overtime rate increased from $25.50 to $25.65.  While this may not seem like much, it adds up, especially if the rate is wrong, is applied to many pay periods, and/or you work a lot of overtime. Either way, these are your wages, and you are entitled to every penny.

What Items Must Be Included in Calculating Your Regular Rate of Pay?

There are a variety of items that are required to be added to your compensation to calculate your regular rate of pay, such as:

• Non-Discretionary Bonuses: These are bonuses you receive based on meeting certain criteria or goals (such as work completed, production numbers, proficiency standards, etc.).  It is not when your employer can choose whether to give it to you, like end-of-year bonuses because the company did well that year.
• Shift Differentials: You get a higher rate for working some shifts, such as graveyard or weekends.
• Increased rates for working more hazardous work.
• Attendance bonuses.
• Incentive pay to remain employed by the same employer.

How Do I Calculate My Regular Rate of Pay?

How rates of pay are calculated depends on the type of additional compensation you receive. For shift differentials or when you are paid two different rates for work during the week, your regular rate is a weighted average of the rates.  To get this, you add up the total wages earned (including any overtime wages) at all rates and divide by the total hours worked.

For bonuses, it depends on whether it is a flat sum amount (like an incentive bonus) or based on the goals met, such as production bonuses. For flat sum bonuses, you divide the bonus by the regular (not overtime) hours worked in the period for which the bonus was earned. This is the regular rate for the bonus.  So, for each overtime hour, you are then owed 1.5 times this amount (or 2x for double-time hours).

For things such as production bonuses that are not a flat sum, you divide the production bonus by the total hours worked in the bonus-earning period.  This is the regular rate on the bonus, and overtime is paid at .5 times the regular rate or 1.0 times it if double time for each overtime/double time hour in the bonus-earning period.

Lastly, if you are paid by piece rate (such as a certain amount per product produced or per box of certain items harvested) or commission, you may not know your regular rate.  However, your regular rate/overtime is calculated in one of two ways. One way is for the piece/commission rate to be used as the regular rate, and your overtime is 1.5 (or 2x for double time) that rate. The second is to take the total earnings for the workweek (even if during overtime hours) and divide them by the total hours worked.  For any overtime hours, you are entitled to an additional 0.5 (or 1.0 for double time) for that rate.

What To Do If I Feel My Regular Rate of Pay Is Wrong?

You work hard and are entitled to every penny you earn. Don’t be the one who says it is only a small amount, so I won’t worry about getting all my wages.

We know that some of the rules and calculations listed above are complex, but that’s why we’re here to help. If you are not sure if your employer has correctly calculated or included everything in your wages, or you think you might be owed more, contact us at Bisnar Chase to ensure your rights are not being violated.

We have a department dedicated to employment and class action cases. Our expert employment lawyers offer a free consultation with no obligations, and our firm has a 99% success rate with over $1 billion won.