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May 13, 2010
How to Calculate Pay, Cost Savings Using the Fluctuating Workweek Method

In a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates," Laura P. Worsinger, Esq., provided an example of how to calculate pay using the fluctuating workweek method and an example of the potential cost savings to an employer.

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Under the fluctuating workweek method, an employee is paid a fixed salary for all hours worked, whether the employee works less than 40 hours or more than 40 hours. In weeks in which the employee works more than 40 hours, the employee is paid an overtime premium for the extra hours.

Pay Using a Fluctuating Workweek

For an employee who works alternating weeks of 48 hours and 72 hours and who is paid $500 per week, the calculation of the biweekly pay would be as follows:

First Week:

  • Regular rate of pay = $10.42/hr ($500/48 hr)
  • Overtime premium = $41.68 (.5 x 8 hr x $10.42/hr)
  • Total pay = $541.68 ($500 + $41.68)

Second Week:

  • Regular rate of pay = $6.94/hr ($500/72 hr)
  • Overtime premium = $111.04 (.5 x 32 hr x $6.94/hr)
  • Total pay = $611.04 ($500 + $111.04)

Total gross pay for the biweekly payroll period would be $1,152.72 ($541.68 + $611.04).

Cost Savings

Suppose the above employee is paid at $10.42/hr (his regular rate of pay in the above example) on an hourly basis. Then, the calculation would be as follows:

First Week:

  • Total regular wages = $500.16 ($10.42/hr x 48 hr)
  • Overtime premium = $41.68 (.5 x 8 hr x $10.42/hr)
  • Total pay = $541.84 ($500.16 + $41.68)

Second Week:

  • Total regular wages = $750.24 ($10.42/hr x 72 hr)
  • Overtime premium = $166.72 (.5 x 32 hr x $10.42/hr)
  • Total pay = $916.96 ($750.24 + $166.72)

Total gross pay for the biweekly payroll period would be $1,458.80 ($541.84 + $916.96).

As a result, an employer that uses the fluctuating workweek method for this employee saves $306.08 every two weeks, or a total of $7,958.08 per year.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at lworsinger@dykema.com.

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