What the Regular Rate Really Means
The regular rate of pay is the hourly figure the Department of Labor uses as the basis for overtime. It is not the wage printed on your offer letter. Under 29 CFR § 778.109, your regular rate equals your total weekly compensation (minus a short list of statutory exclusions) divided by every hour you actually worked that week. If the bonus or shift differential isn't in the numerator, your overtime isn't right.
What Counts Toward Your Regular Rate
Per 29 CFR § 778.108 and § 778.208, these payments must be included before you compute overtime:
- Hourly, piece-rate, and salary wages
- Nondiscretionary bonuses: production, attendance, safety, retention, hiring, and longevity
- Commissions (weekly, monthly, or quarterly, allocated back to the week earned)
- Shift differentials for night, weekend, or hazard shifts
- On-call pay and stand-by pay
- Board, lodging, and other facilities furnished at reasonable cost primarily for the employee's benefit
What's Excluded from the Regular Rate
Per 29 CFR § 778.200 and the 2020 DOL final rule (85 FR 778), these can stay out of the numerator:
- Truly discretionary bonuses (employer retained discretion over both fact and amount)
- Gifts and payments for special occasions
- PTO, holiday pay, sick pay, and vacation payouts
- Reimbursed expenses for travel, uniforms, and tools
- Employer contributions to health, retirement, and profit-sharing plans
- Stock options and ESPP benefits
- True premium payments for working over 8 hrs/day, over 40 hrs/week, or on weekends and holidays (the anti-pyramiding rule)
- Wellness program incentives, tuition assistance, and employee perks clarified in the 2020 final rule
How a Bonus Bumps Your Overtime: The 29 CFR § 778.110(b) Example
Maria earns $12/hr and works 46 hours one week. She also earns a $46 production bonus for hitting her weekly target.
The wrong way (what payroll systems sometimes do):
40 × $12 + 6 × ($12 × 1.5) + $46 = $634
The right way (per 29 CFR § 778.110):
- Straight-time pay = 46 × $12 + $46 = $598
- Regular rate = $598 ÷ 46 = $13.00/hr
- Overtime half-time premium = $13.00 × 0.5 × 6 = $39.00
- Total weekly comp = $598 + $39 = $637.00
The bonus costs Maria's employer an additional $3 in overtime premium that week. Multiply that by a crew of 50 and a year of weekly bonuses, and the gap between compliance and a class-action lawsuit is about $7,800.
Common Errors Employers Make
- Forgetting to include nondiscretionary bonuses in the regular rate before computing overtime.
- Mislabeling nondiscretionary bonuses as "discretionary" because they feel subjective, when 29 CFR § 778.211 requires the employer to retain discretion over both whether to pay and how much.
- Calculating overtime on the base rate instead of the regular rate when shift differentials are in play.
- Allocating a quarterly or annual bonus only to the pay period it's issued. The bonus must be spread over the entire earning period, and overtime must be recalculated retroactively.
- Excluding commissions because "they're paid monthly". Commissions are regular-rate wages no matter the payout frequency.
- Using 2,080 as the divisor for salaried nonexempt workers instead of the hours the salary actually covers (29 CFR § 778.113).
Regular Rate at $20/hr Base, 45 Hours Worked, Varying Weekly Bonus
A quick-reference table showing how a weekly nondiscretionary bonus compounds through your overtime premium. Assumes the FLSA 40-hour threshold and 1.5x multiplier.
| Weekly Bonus | Regular Rate | OT Premium Owed | Total Weekly Comp |
|---|
| $0 | $20.00/hr | $50.00 | $950.00 |
| $50 | $21.11/hr | $52.78 | $1,002.78 |
| $100 | $22.22/hr | $55.56 | $1,055.56 |
| $150 | $23.33/hr | $58.33 | $1,108.33 |
| $200 | $24.44/hr | $61.11 | $1,161.11 |
| $300 | $26.67/hr | $66.67 | $1,266.67 |
| $500 | $31.11/hr | $77.78 | $1,477.78 |
Even a modest $100 weekly bonus pushes an effective $20 hourly rate up by $2.22/hr, which adds $5.56 in premium on a five-hour overtime week. Multiplied across a full year, that's roughly $290 per worker in overtime that standard payroll software routinely misses.
Authoritative Sources
If you want to verify the math or cite the rule in a wage dispute, these are the authorities this calculator follows: