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Payroll & Taxes

What’s so “Regular” About the Rate for Overtime?

Christine Batten, PHR
by Christine Batten, PHR on October 29, 2015

Overtime PayWe’ve all heard the definition of overtime: “time and one half the regular rate of pay.” The use of the word “regular” might suggest something consistent, however depending on the method(s) of pay, the rate itself is anything but.

What is, however, consistent is the method of determining the regular rate; the math, so to speak.

The regular rate is not always an hourly rate when different methods of pay are used, but the math is always the same to get there.

Total Money Earned ÷ Total Hours Worked = Regular Rate

Total Money

The regular rate includes all remuneration for work performed. Employers are free to pay with any method they choose: hourly, piece-rate, day rate, commission, or some other basis (or any combination of those methods). Regardless of how employers come up with the amount their employees will be paid, all the earnings must be included in the calculation of the rate for overtime purposes.

Total Hours

Overtime is based upon total hours actually worked in a 7-day work week. It can be any 7 day period but must remain constant. Overtime is due when a non-exempt employee works more than 40 hours in a work week. Pay for time spent not working need not be included in the rate (i.e. vacation pay, holiday pay, etc.)

Keeping in mind the equation above, let’s take a look at how it works.


Bob worked 47 hours in one week. He earns a base hourly rate of $9.50/hr. and $700 in commissions

Step 1: Determine the regular rate

47 hrs. x $9.50 = 446.50
$446.50 + $700 = $1,146.50 (Total Money)
1146.50 ÷ 47 (Total Hours) = 24.39 (Regular Rate)

The regular rate for this particular workweek is $24.39.

Step 2: Determine how much overtime is due

The $1,146.50 covers the straight time for all 47 hours (the “time”) so now you just owe the extra half time (the “and one half”) for the 7 hours of overtime Bob worked.

$24.39 x .50 = $12.20 (½ the regular rate)
$12.20 x 7hrs. = $85.40 (This is the amount of overtime due for this workweek)
$1,146.50 + $85.40 = $1,231.90 (Total Gross)

Employers are permitted to pay different hourly rates of pay for different work as long as the rate is at least minimum wage. For example, a construction employer might pay their laborers $9/hr for compensable drive time and $15/hr for time spent at the worksites.

It does not matter when each part of the work is performed (employers cannot suggest which work they were performing that “caused” the overtime). The method remains constant.

The Takeaway

Employers are required to track the number of hours worked by their non-exempt employees. As previously mentioned, employers are also free to determine the method and amount of pay they wish to use.

The good news is that using a PEO eliminates the burden of doing all that math! You simply report rates and amounts and we do the rest. This can be a huge time-saver and you can rest assured the calculations will be accurate.


Christine Batten, PHR
Christine Batten, PHR

Christine has over 20 years of HR related experience with a background in labor and employment law.