When you work more than 40 hours in a workweek, you receive overtime pay. The Fair Labor Standards Act (FLSA) requires overtime to be at least one and a half times your “regular rate” of pay. Understanding how employers should determine this rate helps you ensure your employer pays you correctly.
How is the regular rate calculated?
Your regular rate includes more than just your base hourly wage. It accounts for all earnings you receive for employment, including bonuses, shift differentials, and commissions. To calculate it, divide your total earnings for the workweek by the total number of hours worked. This calculation determines the rate on which to base overtime.
For example, if you earn $15 per hour and receive a $100 non-discretionary bonus in a 40-hour workweek, your total earnings equal $700. Dividing $700 by 40 results in a regular rate of $17.50 per hour. Your overtime rate becomes $26.25 per hour for any additional hours worked that week.
What payments are included or excluded?
The FLSA includes commissions, shift differentials, and non-discretionary bonuses in your regular rate calculation. However, certain payments are excluded, such as discretionary bonuses, holiday gifts, and reimbursement for expenses.
Indiana follows federal law on overtime but allows employers to use different methods to calculate bonuses and commissions into the regular rate. If you receive these types of payments, review how they affect your overtime pay.
What if your employer miscalculates your rate?
If your employer does not include the correct earnings in your regular rate, your overtime pay may fall below the required amount. Employers who miscalculate overtime face penalties, and you may qualify for back pay. Keeping track of your hours and earnings helps you verify that you receive the full wages you have earned.
The FLSA and Indiana state law protect your right to fair overtime pay. If you suspect underpayment, reviewing your pay records and understanding your rights ensures fair compensation.