**Commissions
and overtime.** The FLSA does not require that
overtime be paid weekly. The general rule is that overtime pay earned
in a particular workweek must be paid on the regular payday for the
period in which the workweek ends. If the amount of overtime owed
cannot be determined until sometime after the regular pay period,
the employer must pay the overtime compensation as soon as is practicable.
An example of that would be if an employee later receives commissions
that must be included in calculating his or her regular rate of pay.

Commissions must be included in total remuneration, regardless
of the basis on which they are calculated and whether they are the
sole source of income or paid in addition to a guaranteed salary or
hourly rate. The fact that commissions are paid on some other basis
than weekly, or that payment is delayed for a time past the employer’s
normal payday, does not excuse the employer from including them in
the employee’s regular rate. Note that, as a practical matter, most
commissions are calculated on the basis of periods of time (for instance,
months and quarters) that are not neatly divided into equal 7-day
FLSA workweeks.

Employers may have to retroactively calculate the regular
rate and overtime owed for commissions, bonuses, or other forms of
compensation that are paid irregularly or cannot be identified with
a particular workweek. If an employer does not know the amount of
a commission or bonus until the end of the month, quarter, or even
year, it may temporarily disregard them in making weekly overtime
pay calculations. However, once the payment is made, the employer
must retroactively calculate and pay any overtime owed for those weeks.
It can be issued as a separate check or included in the employee’s
next paycheck or a bonus check.

Commissions must be included in total remuneration, regardless
of the basis on which they are calculated or whether they are the
employee’s sole source of income or paid in addition to a guaranteed
salary or hourly rate.

When an employee’s pay is increased by bonuses, commissions,
or other forms of additional compensation, his or her regular and
overtime rates of pay are also increased. The following calculations
are used:

• Divide the employee’s total earnings for the week—including
bonuses, commissions, and so on—by the number of hours worked to determine
the regular rate of pay for the week.

• Multiply the regular rate by 1.5 to determine the employee’s
overtime rate for the week.

• Multiply the regular rate by 40 nonovertime hours; multiply
the overtime rate by the number of overtime hours worked, and then
add the two totals to determine total compensation owed for the week,
including overtime; *or*

• Multiply the regular rate by the total number of hours
worked, including overtime; then multiply one-half the regular rate
by the number of overtime hours worked, and add the two totals to
determine compensation owed for the week, including overtime. This
should be the same result as reached under the method described in
the third bullet point, above.

If a monthly bonus is paid at the end of the month but
the employee was paid weekly, the employer must apportion the bonus
among the workweeks. For each week in which the employee earned some
portion of the bonus, the employer must then:

• Recalculate the employee’s regular rate of pay with
the commission added in;

• Subtract the original rate of pay from the adjusted
rate of pay (to find out how much it was increased by the bonus or
commission); *and*

• Pay the employee one-half the amount of the increase
for each overtime hour worked in that week.

If it is impossible to attribute bonuses and commissions
to the actual week in which they were earned, some other reasonable
and equitable method of allocation must be adopted. For example, it
may be reasonable and equitable to assume that the employee earned
an equal amount of bonuses or commissions during each week of the
pay period. It is generally not acceptable to simply attribute a commission
or bonus earned over time to the single workweek in which it is calculated
and/or paid.

**Example 1.** At the end of December,
Robert received a $600 longevity payment based on his years of continuous
service with the company. The payment was made pursuant to a long-standing
policy set forth in the company’s employee handbook. During the year,
Robert worked 2,000 regular hours and 500 overtime hours, for a total
of 2,500 hours. He was paid his regular hourly rate and an appropriately
calculated overtime rate for all those hours. However, when he receives
the longevity bonus, he is entitled to receive additional overtime
compensation as follows:

• The employer must adjust his regular rate, retroactively,
by $.24 per hour ($600÷2,500 hours).

• This means he is entitled to an additional $.12 ($.24
x .5) for each overtime hour worked during the year.

• He is entitled to an additional $60 in overtime pay
($.12 x 500 overtime hours).

• The total payment owed to Robert is $660 (the amount
of his longevity pay plus additional overtime owed).

If an employee receives a weekly commission, it is treated
the same as a bonus for the purpose of calculating overtime owed for
the week. The commission is added to the employee’s hourly earnings
for the workweek, and the total is divided by the total number of
hours worked to obtain the employee’s regular hourly rate. The employee
must then be paid the overtime rate of one and one-half times the
regular rate for each overtime hour worked that week.

**Example 2. ** Zack is a nonexempt
inside sales employee. He is paid $15 per hour, plus commissions totaling
10 percent of any sale made during a workweek. During a workweek,
he works 50 hours and earns $200 in commissions. His compensation
is calculated as follows: First, take his total earnings for the week
($750 in hourly pay ($15 x 50) plus the $200 bonus, totaling $950)
and divide that figure by the number of hours worked (50) to determine
the adjusted regular rate, which is $19. Zack is thus owed $19 per
hour for all 50 hours worked, plus an additional $9.50 (one-half of
$19) for the 10 overtime hours, or $1,045 in total compensation for
the week. This amount incorporates the hourly pay, the commission,
and overtime at the correct rate.