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Regular Rate
Practical Law Glossary Item 2-616-2245 (Approx. 3 pages)
Glossary
Regular Rate
Under the Fair Labor Standards Act (FLSA), the hourly rate used to calculate overtime pay. The FLSA requires employers to pay overtime compensation at a rate of at least 1.5 times the employee's regular rate for all hours worked over 40 in any workweek (29 U.S.C. § 207(a)).
The regular rate generally includes all compensation for employment, including an employee's hourly wage or salary and other types of compensation. The following payments, however, can be excluded from the regular rate if they satisfy statutory requirements:
- Gifts.
- Certain payments that are not made as compensation for hours of work, such as vacation pay and reimbursement for business expenses.
- Discretionary bonuses.
- Payments to a bona fide profit-sharing plan or trust or a bona fide thrift or savings plan.
- Irrevocable contributions to employee health and welfare plans.
- Talent fees (as defined by the US Secretary of Labor) paid to performers.
- Premium (or extra) pay for daily or weekly overtime.
- Premium pay for work on weekends, holidays, regular days of rest or the sixth or seventh day of the workweek, if it is at least 1.5 times the rate for work performed during non-overtime hours on other days.
- Premium pay for work outside the agreed to hours, if it is at least 1.5 times the rate for work performed during the agreed to hours.
- Certain stock options, appreciation rights, and purchase programs.
For more information, see Practice Note, The Regular Rate of Pay Under the FLSA: Statutory Exclusions.
State and local wage and hour laws may also require that overtime pay be calculated based on an employee's regular rate. However, states and localities may impose additional or different regular rate requirements. For more information, see Wage and Hour Laws: State Q&A Tool.