What Is the Regular Rate of Pay Under the FLSA?

If you work overtime and your paycheck seems lower than it should be, the problem may be how your employer calculates the “regular rate of pay.” Under the Fair Labor Standards Act (FLSA), 29 USC § 207(a)(1) requires employers pay overtime at one and one-half times the regular rate for every hour worked beyond 40 in a workweek. The regular rate isn’t simply your hourly wage, it’s a broader legal concept capturing nearly all compensation you receive for work. When employers exclude certain payments from this calculation, you may be owed significant unpaid overtime compensation.

If you believe your employer has been excluding pay from your overtime calculation, The Lore Law Firm can help. Call 866-559-0400 or request a free case evaluation today to discuss your situation.

How the FLSA Defines the Regular Rate of Pay

The FLSA regular rate definition is broader than many workers realize. Under 29 USC § 207(e), the regular rate “shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee,” subject to specific statutory exclusions. This means your employer generally cannot limit the overtime calculation to just your base hourly wage if you also earn commissions, non-discretionary bonuses, incentives, shift differentials, or piece-rate pay.

The formula is straightforward. According to the Department of Labor’s Fact Sheet #56A, you calculate the regular rate by dividing total compensation in the workweek (minus statutory exclusions) by total hours worked. This average hourly rate then serves as the basis for the time-and-a-half overtime premium. The regular rate cannot be lower than applicable minimum wage and cannot be reduced by agreement between employer and employee.

💡 Pro Tip: Review your pay stubs carefully. If you earn bonuses, incentives, commissions, or shift differentials and your overtime rate appears based only on your base hourly wage, your employer may be underpaying your overtime.

What Payments Must Be Included in the OT Calculation Lawyer Should Know

Nearly every form of compensation tied to your work should factor into the regular rate. This includes hourly wages, non-discretionary bonuses, incentives, commissions, shift differentials, and piece-rate earnings. Failure to include compensation in overtime calculations is one of the most common wage and hour violations, affecting workers across industries including healthcare, warehousing, retail, hospitality, and trucking.

Non-discretionary bonuses are a frequent source of disputes. If your employer promises a bonus based on productivity, attendance, or meeting targets, that bonus is generally non-discretionary and must be included in the regular rate. Under 29 USC § 207(e)(3), a bonus qualifies as discretionary only if (1) both the fact that payment will be made and the amount are determined at the employer’s sole discretion at or near the period’s end, and (2) the payment is not made pursuant to any prior contract, agreement, or promise that causes the employee to expect such payments regularly. The label your employer places on a bonus doesn’t determine whether it’s truly discretionary.

Compensation Commonly Left Out of Overtime

Many employers exclude the following types of pay from the regular rate:

• Non-discretionary bonuses (production, attendance, safety bonuses)

• Commissions and incentive pay

• Shift differentials and premium pay for undesirable shifts

• Piece-rate earnings

• On-call pay or stipends tied to work duties

When these forms of pay are improperly excluded, the resulting overtime rate is lower than legally required, and you may be owed back wages.

💡 Pro Tip: If your employer calls a recurring bonus “discretionary” but you receive it every pay period based on set criteria, it may actually be non-discretionary under the FLSA and should be part of your overtime pay regular rate.

Payments That May Be Excluded From the Regular Rate

Not every dollar your employer pays you belongs in the overtime calculation. Section 7(e) of the FLSA, codified at 29 USC § 207, lists specific categories of payments that employers may lawfully exclude from the regular rate.

Statutory Exclusions Under Section 7(e)

The following table summarizes key categories of excludable payments:

The 2019 Final Rule updated these regulations significantly. The regular rate regulations in Parts 778 and 548 of Title 29 had not been significantly revised in over 50 years before this update, which clarified employers may exclude items like office coffee, snacks provided as gifts, and reimbursed expenses.

💡 Pro Tip: Just because a payment appears on the exclusion list doesn’t mean your employer is applying it correctly. A bonus labeled “discretionary” that’s actually tied to performance metrics may not qualify for exclusion. Substance matters more than the label.

How Improper OT Calculation Lawyer Cases Typically Arise

Overtime violations involving the regular rate often go unnoticed for months or years. Many workers don’t realize they’re being shortchanged because the underpayment per hour may seem small. However, when multiplied across dozens of overtime hours per week over months, the total unpaid overtime compensation can be substantial.

Common scenarios include employers who pay a flat hourly overtime rate without accounting for bonuses earned during the same period. For instance, if you earn a $200 weekly production bonus and work 50 hours, your employer must recalculate the regular rate to include that bonus before determining the overtime premium for those 10 extra hours.

Workers in staffing-agency placements, call centers, and delivery roles are particularly vulnerable because their pay structures often involve multiple components. If you work in these industries and earn overtime, consider reviewing how your employer handles the FLSA overtime rate calculation.

The Commission Exemption and the Regular Rate

Certain employees in retail or service establishments may be exempt from overtime under a separate provision. Under 29 USC § 207(i), the FLSA provides an exemption from overtime if two conditions are met: (1) the employee’s regular rate exceeds one and one-half times the applicable minimum wage, and (2) more than half of the employee’s compensation for a representative period comes from commissions. If either condition isn’t satisfied, the employee is entitled to overtime at the standard rate.

When the Exemption Does Not Apply

Employers sometimes misapply this exemption, either by miscalculating the regular rate threshold or mischaracterizing the proportion of commission-based pay. If your employer claims you’re exempt under Section 207(i) but your commissions don’t actually make up more than half your total compensation, you may have a valid claim for unpaid overtime.

💡 Pro Tip: If you work in retail or a service industry and receive both an hourly wage and commissions, ask your employer to show how your exemption status was determined. You have the right to understand how your pay is calculated.

What You Can Do If Your Employer Excluded Pay From Overtime

Start by gathering your pay records, including pay stubs, timesheets, and any written bonus or commission policies. These documents can help an OT calculation attorney evaluate whether your employer correctly computed your regular rate. Under the FLSA, employers who willfully violate overtime requirements may face liability for up to three years of back pay, plus an equal amount in liquidated damages.

You don’t need to prove the exact dollar amount owed before seeking legal help. An experienced wage and hour lawyer can analyze your pay records, identify which forms of compensation were improperly excluded, and calculate the full amount of overtime you may be owed.

💡 Pro Tip: Keep copies of all pay-related documents in a personal file outside of your employer’s systems. If a dispute arises, having independent records can strengthen your position significantly.

Frequently Asked Questions

1. What is the regular rate of pay under the FLSA?

The regular rate is the average hourly rate derived from all remuneration for employment, minus specific statutory exclusions listed in 29 USC § 207(e). It serves as the base for calculating the time-and-a-half overtime premium required for hours worked over 40 in a workweek. The regular rate may be higher than your base hourly wage if you receive bonuses, commissions, or other compensation.

2. Does my employer have to include bonuses in overtime calculations?

In many cases, yes. Non-discretionary bonuses, such as those based on attendance, production, or performance targets, must generally be included in the regular rate. A bonus is only excludable under 29 USC § 207(e)(3) if (1) both the decision to pay it and the amount are entirely at the employer’s sole discretion, and (2) the payment is not made pursuant to any prior contract, agreement, or promise that causes the employee to expect such payments regularly. The bonus label doesn’t control its legal classification.

3. Can my employer and I agree to a lower regular rate?

No. The regular rate is determined by actual compensation received and cannot be circumvented by agreement. It also may not fall below applicable FLSA minimum wage. State or local laws may impose higher minimum wage requirements that affect overtime calculations. Any arrangement attempting to artificially reduce the regular rate is unlikely to withstand legal scrutiny.

4. How far back can I recover unpaid overtime?

Under the FLSA, the standard statute of limitations for unpaid overtime claims is two years under 29 USC § 255(a). However, if the violation was willful, the statute provides for a three-year limitations period. Consulting with an attorney promptly is important.

5. What industries see the most regular rate violations?

Regular rate violations occur across many sectors, but they’re particularly common in hospitality, healthcare, retail, warehousing, manufacturing, trucking, delivery services, call centers, and staffing-agency placements. Workers in these industries often receive complex pay structures with multiple components, increasing the risk that employers will miscalculate the regular rate for FLSA overtime rate calculation purposes.

Protecting Your Right to Full Overtime Pay

Understanding the regular rate of pay under the FLSA is essential for any worker who earns overtime. The law requires employers to include nearly all forms of compensation in the regular rate, and failure to do so can result in significant underpayment. Whether your employer excluded a production bonus, miscalculated commissions, or ignored shift differentials, you may have a valid claim for unpaid wages and damages.

The Lore Law Firm is committed to helping employees recover the overtime pay they’ve earned. If you suspect your employer has been calculating your overtime incorrectly, call 866-559-0400 or submit a free case evaluation to learn more about your legal options – it’s free and confidential.

Michael Lore

Founding Attorney

Michael Lore is the founder of The Lore Law Firm with over 25 years of experience in labor and employment law. He handles cases ranging from unpaid overtime and class actions to executive contracts and personal injury matters in courts nationwide.

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