How to calculate overtime pay can be an extremely frustrating experience if you do not have instant access to analysis of the Fair Labor Standards Act (FLSA) regulations.
Calculating the Regular Rate of Pay
For nonexempt employees, the overtime rate is 1 1/2 times their regular rate of pay. The regular rate must include: the reasonable cost of meals, lodging, and other facilities provided to the employees (NOT for the benefit of the employer), nondiscretionary bonuses, on-call pay, shift differentials, and cash benefit payments from Section 125 Cafeteria Plans and other forms of compensation not specifically excluded from overtime laws by the FLSA.
There are eight narrowly construed exceptions to inclusion of payments in the regular rate - those include gifts, vacation, premium pay, weekends, stock options etc. The FLSA regulations are designed to preclude an employer from setting an artificially low rate of pay on which overtime is calculated, and then providing additional compensation to the employee by other means.
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