Not legal advice. Educational guide to general U.S. employment law. Rules vary by state — consult an employment attorney for specific cases.
01
The regular rate, defined
The FLSA requires overtime at one and one-half times the regular rate for hours worked past 40 in a workweek — and the statute's whole trick is that the regular rate is a computed number: all includable compensation for the week, divided by all hours actually worked. An employee earning $20/hour plus a $100 production bonus in a 50-hour week does not have a $20 regular rate. Every employer who pays anything beyond a bare hourly wage to non-exempt employees needs this math in payroll, not in a spreadsheet after a demand letter.
02
What goes in, what stays out
In the rateNondiscretionary bonuses (production, attendance, quality, retention tied to work), shift differentials, commissions, on-call pay, the value of most non-cash wages.
Out of the rateTruly discretionary bonuses (no promise, no formula, decided at the employer's sole discretion near payment), gifts, PTO and holiday pay for hours not worked, expense reimbursements, premium pay that's already 1.5×, benefit-plan contributions.
The trapCalling a bonus "discretionary" doesn't make it so — if employees expect it because it's announced, formula-driven, or routine, it's in the rate, per 29 CFR 778.
03
Worked examples
Hourly + bonus$20/hr, 50 hours, $100 bonus. Regular rate: (1,000 + 100) ÷ 50 = $22. Overtime premium: 10 hrs × $11 = $110. Total: $1,210 — not the $1,200 a payroll system ignoring the bonus produces.
Salaried non-exempt$800 salary for a fluctuating week, 50 hours worked. Regular rate: 800 ÷ 50 = $16; each overtime hour needs at least a half-time premium ($8) on top — arrangements differ, but the divisor logic is fixed by 778.
Deferred bonusA quarterly bonus must be apportioned back across the workweeks it covers and the overtime premium on it paid retroactively — the step almost every manual process misses.
04
State overlays and common errors
California adds daily overtime (1.5× past 8 hours, 2× past 12, plus seventh-day rules), Alaska, Nevada and Colorado have daily or related triggers, and several states regulate the fluctuating-workweek method out of existence — check the work state before adopting any pay plan. The recurring federal errors: averaging two weeks to dodge one week's overtime (each workweek stands alone), paying "comp time" in the private sector, and leaving the quarterly bonus out of the rate. When these surface, they surface as the collective actions described in the unpaid overtime guide — multiplied across every affected employee and workweek.
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Frequently asked questions
Is overtime just 1.5 times the hourly wage?Only when the hourly wage is the employee's entire compensation. The FLSA's regular rate divides all includable pay — base wages plus nondiscretionary bonuses, shift differentials, commissions — by all hours worked that week; overtime is 1.5× that figure.
Do bonuses have to be included in overtime calculations?Nondiscretionary ones, yes — anything promised or expected (production bonuses, attendance bonuses, retention bonuses tied to work). Truly discretionary bonuses, gifts, and payments like health premiums and expense reimbursements stay out, per 29 CFR 778.
Can employees get comp time instead of overtime pay?Private-sector employers cannot substitute comp time across workweeks — each week stands alone and overtime earned is owed in cash. Public-sector comp time runs under separate rules.
Which states require daily overtime?California is the headline: over 8 hours in a day at 1.5×, over 12 at 2×, plus seventh-consecutive-day rules. Alaska, Nevada and Colorado have daily or related triggers. Federal law counts only the 40-hour week — states can add more.
