The formulas
- Regular rate = (fixed salary + other includable pay) / hours worked that week
- Overtime = 0.5 x regular rate x hours over 40
- Total = salary + other pay + overtime
How it works
Under 29 CFR 778.114 an employer may use the fluctuating workweek method when hours vary week to week, the fixed salary does not vary with hours, the salary covers at least the minimum wage for every hour in the longest weeks, both sides understand the salary covers all hours worked, and overtime is paid at not less than half the regular rate.
Because the salary already pays straight time for all hours, only the half-time premium is added. The regular rate falls as hours rise. Bonuses, commissions and other non-excludable pay are added to the salary before dividing by hours.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Why is the overtime only half the rate?
The fixed salary already compensates every hour at the straight-time rate for that week, so only the extra half is due for overtime hours.
Can bonuses be paid under this method?
Yes. The rule states such payments are compatible with the method and must be included in the regular rate unless excludable.
Sources
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