Compliance guide

The FLSA Regular Rate of Pay

Praisidio compliance research team

Quick answer

What is the regular rate?: Total pay for the workweek divided by total hours worked. It is not the base hourly rate.
Do bonuses count?: Nondiscretionary bonuses do and must be included. Genuinely discretionary bonuses do not.
What about a quarterly bonus?: It must be spread back across the weeks it was earned, with overtime recalculated for each.

Due:         No filing. Applies to every overtime workweek.
Applies to:  Non-exempt employees under the FLSA
Governed by: 29 U.S.C. §207(e) and 29 CFR Part 778
Knock-on:    Overtime, California break premiums, some sick pay rates,
             workers' compensation payroll

The regular rate is the foundation everything else in wage and hour sits on. Get it wrong and overtime is wrong, California break premiums are wrong, and workers' compensation payroll is wrong - all from a single upstream defect. The rules are in 29 U.S.C. §207(e) and 29 CFR Part 778.

The definition

Regular rate = total remuneration for employment in the workweek ÷ total hours worked in that workweek.

It is a rate per workweek, recalculated each week. It is not a fixed hourly figure and it is not the base rate on the employee's record.

What must be included

Nondiscretionary bonuses, including production, attendance and safety bonuses
Shift differentials
Commissions
On-call pay
Non-cash compensation at fair value

What is excluded under §207(e)

Genuinely discretionary bonuses, where both the fact and the amount stay in the employer's discretion until near payment
Gifts
Payments for time not worked - PTO, holiday, sick pay
Reimbursed expenses
Premium pay for daily overtime and weekend or holiday work that meets §207(e)(5) through (7)
Certain benefit plan contributions

The 2020 final rule clarified treatment of wellness programmes, certain perks and reimbursements.

Bonus reallocation

A bonus covering more than one workweek must be reallocated across the period it was earned, and overtime recalculated for every affected week. A quarterly bonus paid in one lump does not belong to the week it was paid. This is the retro calculation most payroll teams skip, and it is the one a Wage and Hour investigator looks for first.

What data this filing needs

✓All earnings by workweek and by earnings code, flagged as includable or excludable
✓Hours worked by workweek, held separately from paid non-working hours
✓Bonus payments tagged with the period they were earned over, not just the period paid
✓Multiple pay rates per employee where applicable
✓Shift differential and premium detail at punch level

Where it goes wrong

Base rate used instead of the regular rate. The root cause of both overtime and California premium underpayment.
Bonuses not reallocated, so overtime for the earning weeks was underpaid.
"Discretionary" applied to bonuses announced in advance, which makes them nondiscretionary whatever the policy calls them.
PTO hours in the denominator. Only hours worked belong there.
The exclusions treated as a general list rather than the specific statutory categories they are.

Frequently asked questions

Is the regular rate the same as the base hourly rate?

No, and treating them as the same is the most expensive assumption in wage and hour.

What makes a bonus discretionary?

Both the fact and the amount must remain in the employer's sole discretion until near payment. Announced criteria make it nondiscretionary.

Does PTO go into the calculation?

Payments for time not worked are excluded from the numerator, and those hours do not go in the denominator.

How do we handle an employee working at two different rates?

Weighted average across the week, unless a valid §207(g) agreement applies.

Do we recalculate overtime when we pay an annual bonus?

Yes, across every overtime week in the bonus period.

Are shift differentials included?

Yes.

Are per diems included?

Reasonable reimbursements are excluded; amounts functioning as disguised wages are not.

Does this matter outside overtime?

Yes. California break premiums, some sick pay rates and workers' compensation payroll all key off it.

Systems supported: Praisidio reads from payroll, HRIS, time and attendance, benefits administration and scheduling systems - see the full integrations list.

This guide is general information about reporting requirements, not legal advice. Verify current deadlines, thresholds, rates and penalty amounts against the issuing agency before you file.