DOL Issues Final Rule on Calculating the Regular Rate of Pay

66 Analog Calendar

The Department of Labor (DOL) recently announced its final decision on the calculation of the regular rate of pay, effective on January 15, 2020. The new rule clarifies common overtime pay issues and will allow employers to offer perks and benefits to their employees more efficiently. 

 Previous rules about the regular rate of pay

Under the Fair Labor Standards Act (FLSA), the regular rate of pay includes hourly wages and salaries for non-exempt workers in a 40-hour, non-overtime workweek. The regular rate is not necessarily the same as an employee’s base hourly rate of pay. Therefore, when calculating overtime, the regular rate may include variables such as hourly rate plus nondiscretionary bonuses.

Although the rules specify when an employee is eligible to receive overtime pay, the current regulations leave employers unclear about where benefits and perks fit in the regular rate of pay.

New rules about the regular rate of pay

The new rule clarifies the confusion employers often face regarding when to include perks and benefits in the regular rate of pay for the purpose of calculating overtime.  

The regular rate calculation can exclude benefits or perks such as unused paid leave or business expense reimbursements. Certain sign-on bonuses and employer contributions to benefit plans can also be excluded. Check out the full list of excluded benefits and perks here

Steps you can take now 

  • Audit your employees’ regular rates of pay used for calculating overtime to determine if changes need to be made. 
  • Carefully decide when to exclude bonus amounts from the regular rate. Labeling a bonus as discretionary cannot on its own support it being excluded from the regular rate.
  • Determine if your state’s overtime pay law matches the federal overtime law — state laws might have stricter rules about overtime calculations. As a reminder, the rule that benefits the employee the most must be the one you use.

The DOL expects the final rule to encourage some employers to start providing benefits they previously avoided, which might have a positive impact on workplace morale, employee compensation, and employee retention. Take a look at the FAQs published by the DOL for more info on the regular rate final rule. 

We’re here to help! Contact your payroll specialist if you have any questions or if you need to make changes to overtime pay for your employees. 

Also on Nextep

Don’t worry. Nextep’s payroll processing is unaffected by the SVB closure. At Nextep, we understand that the recent closure of Silicon Valley Bank (SVB) has caused concern for our clients and their employees who bank with SVB. We want to assure you that Nextep’s ability to process payroll remains unaffected by this event. We are […]
Read more
On December 29, 2022, President Biden signed into law two bills that add protections for pregnant and post-partum employees. Here is what we know. Providing Urgent Maternal Protections for Nursing Mothers Act The PUMP Act amends the Fair Labor Standards Act (FLSA) to expand coverage to all employees (exempt and non-exempt). Employers are required to […]
Read more
Your Guide to DOL’s Latest Guidance on Telework, Lactation Breaks, and FMLA Eligibility for Remote Employees Are you an employer of employees who telework, or employees who needs breaks for lactation? Then you’ll want to read this update! The US Department of Labor (DOL) recently released Field Assistance Bulletin (FAB) No. 2023-1, which covers several […]
Read more
Your Guide to the Latest Court Ruling on the FLSA Administrative Exemption If you’re an employer in Maine, Massachusetts, New Hampshire, Rhode Island, or Puerto Rico, listen up! The 1st US Circuit Court of Appeals has clarified the Fair Labor Standards Act’s (FLSA) administrative exemption, and it could be a game-changer for your business. In […]
Read more
Empowering Employees and Employers Alike to Create Inclusive Work Environments As of January 24, 2023, the Equal Employment Opportunity Commission (EEOC) has updated its guidance on correctly handling people with hearing disabilities at work under the Americans with Disabilities Act (ADA). This updated guidance is essential for employers looking to create a more inclusive and […]
Read more
Your Intro to the H1-B Visa Process Exciting news for employers eagerly anticipating the 2024 H-1B cap initial registration period! Federal immigration officials have officially announced that registration will open between March 1 to March 17, 2023. Employers can register for the H-1B cap using USCIS’s online registration system. The H-1B visa, as a reminder, […]
Read more
Rest Up! For Illinois Workers, ODRISA is Now Law Beginning in 2023, The One Day Rest In Seven Act (ODRISA) allows Illinois employees the right to take one day off in seven, plus breaks during a long workday.  Here’s a breakdown of the basics: Employees must get a minimum of 24 hours of rest every […]
Read more
Starting in 2023, Illinois workers have expanded job-protected bereavement leave under the Family Bereavement Leave Act (FBLA). Let’s dig into the details. FBLA allows eligible employees to take up to 10 work days of unpaid leave following the death of a family member. Specifically, they are allowed time for any of the events covered by […]
Read more
Your medical leave could qualify for paid time off if you work in Colorado.  We’re familiar with the Family Medical Leave Act (FMLA), allowing qualified employees up to 12 weeks of unpaid, job-protected leave to care for themselves or a family member during certain medical or family events. But the FAMLI program takes this coverage […]
Read more
What business owners need to know right now. On January 5, 2023, the Federal Trade Commission (FTC) proposed a rule to prohibit non-competition clauses (“non-competes”) in employment agreements.  Non-compete provisions include broadly written non-disclosure agreements that ban working in the same field post-employment and require employees to pay “training costs” if the employment terminates within […]
Read more
Asking about salary history may be banned in your state. “So, tell me about your salary history at your current job.” It’s a typical job interview question, often used by recruiters to help gauge whether the candidate would be satisfied with the salary offered at their company. Sometimes, though, the question can help them determine […]
Read more
If you don’t have transparent pay, you may be legally obliged to do it soon.   California is the latest of several states to mandate transparent pay in job postings.  When advertising a job vacancy, California businesses with 15 or more employees must now show a salary range that the employee may expect to earn […]
Read more

Download Our App