Quick answer: When an employee works at two or more pay rates in one workweek, federal law sets the overtime rate from a weighted average, called the regular rate. Add all straight-time pay for the week, including nondiscretionary bonuses, divide by total hours worked, then pay an extra half of that regular rate for every hour over 40 (29 CFR 778.115). 30 hours at $20 plus 15 hours at $26 gives a regular rate of $22.00 and a total of $1,045.00.
Why a single hourly rate is not enough
Overtime under the Fair Labor Standards Act is 1.5 times the employee’s regular rate, and the regular rate is not always the base wage. It includes almost everything paid for work: different job rates, shift differentials, commissions and bonuses that were promised in advance. Paying time and a half on the base rate alone is one of the most common reasons employers owe back wages.
regular rate = total straight-time pay ÷ total hours workedOvertime owed = straight-time pay + 0.5 × regular rate × hours over 40Calculate a weighted overtime week
Total pay for the week
$1,045.00
Worked example: two job rates
A cashier who also works as a shift lead
- 30 hours as a cashier at $20.00 = $600.00.
- 15 hours as a shift lead at $26.00 = $390.00.
- Straight-time pay: $600.00 + $390.00 = $990.00 for 45 hours.
- Regular rate: $990.00 ÷ 45 = $22.00.
- Overtime premium: 0.5 × $22.00 × 5 hours = $55.00.
- Total: $990.00 + $55.00 = $1,045.00.
Result: $1,045.00 for the week
Notice that the straight-time pay already covers the first 1.0 of every hour, including the 5 overtime hours. That is why only the extra half is added. Multiplying 5 hours by 1.5 × $22.00 and adding it on top would double count.
Worked example: a nondiscretionary bonus
A bonus promised in advance for attendance, production or quality is nondiscretionary and must go into the regular rate (29 CFR 778.208 to 778.211). A truly discretionary bonus, where the amount and the decision to pay are both at the employer’s sole discretion, is excluded.
45 hours at $20.00 with a $100 attendance bonus
- Straight-time pay: 45 × $20.00 + $100.00 = $1,000.00.
- Regular rate: $1,000.00 ÷ 45 = $22.22.
- Overtime premium: 0.5 × $22.22 × 5 = $55.56.
- Total: $1,000.00 + $55.56 = $1,055.56.
Result: $1,055.56, not the $1,050.00 you get by ignoring the bonus
Worked example: a night shift differential
44 hours at $18.00, with a $2.00 premium on 20 night hours
- Straight-time pay: 44 × $18.00 + 20 × $2.00 = $832.00.
- Regular rate: $832.00 ÷ 44 = $18.91.
- Overtime premium: 0.5 × $18.91 × 4 = $37.82.
- Total: $832.00 + $37.82 = $869.82.
Result: $869.82
Bonuses paid monthly or quarterly
When a bonus covers several weeks, it is allocated back across those weeks and extra overtime is owed for any week with overtime hours (29 CFR 778.209). The simplest fair method splits the bonus equally per week.
| Week | Hours | Bonus share | Bonus per hour | Extra overtime owed |
|---|---|---|---|---|
| 1 | 42 | $100.00 | $2.381 | 0.5 × $2.381 × 2 = $2.38 |
| 2 | 40 | $100.00 | $2.500 | $0.00 |
| 3 | 45 | $100.00 | $2.222 | 0.5 × $2.222 × 5 = $5.56 |
| 4 | 40 | $100.00 | $2.500 | $0.00 |
| Total | 167 | $400.00 | $7.94 |
What counts toward the regular rate
| Include | Exclude (29 CFR 778.200 and following) |
|---|---|
| Hourly wages at every rate worked | Truly discretionary bonuses |
| Shift differentials and hazard pay | Gifts, such as a holiday gift not tied to hours or output |
| Nondiscretionary bonuses: attendance, production, retention promised in advance | Paid time off: vacation, holiday and sick pay for hours not worked |
| Commissions | Expense reimbursements |
| On-call pay | Premium pay already at 1.5x or more, such as some weekend premiums |
The alternative: overtime at the rate for the job
Federal rules also allow overtime hours to be paid at 1.5 times the rate of the job actually performed during those overtime hours, if the employer and employee agreed to this before the work was done (29 CFR 778.419). The weighted average method is the default, and it is what most payroll systems apply.
State differences
- California requires daily overtime after 8 hours and double time after 12, and the California Supreme Court (Alvarado v. Dart Container, 2018) held that flat-sum bonuses must be divided by non-overtime hours only, which gives a higher regular rate than the federal method.
- Alaska, Colorado and Nevada also have daily overtime rules in some situations.
- Every state must at least meet the federal regular rate rules for covered, nonexempt employees.
Frequently asked questions
What is the weighted average overtime method?
It sets the overtime rate from the average of all rates worked in the week. Total straight-time pay is divided by total hours to get the regular rate, and half of that rate is added for every overtime hour.
Do bonuses count toward overtime?
Nondiscretionary bonuses, such as attendance or production bonuses promised in advance, must be included in the regular rate. Truly discretionary bonuses and gifts are excluded.
Why is only half the regular rate added for overtime hours?
Straight-time pay already pays every hour, including overtime hours, at 1.0 times. The extra 0.5 brings those hours up to 1.5 times the regular rate.
Can I pay overtime at the rate of the job worked instead?
Yes, under 29 CFR 778.419, if the employer and employee agreed in advance. Otherwise the weighted average method applies.
Does paid vacation count in the regular rate?
No. Pay for hours not worked, such as vacation, holiday and sick pay, is excluded, and those hours do not count toward the 40-hour overtime threshold under federal law.
How do I handle a quarterly bonus?
Allocate it back to the weeks it covers and pay an extra half of the bonus per hour for each overtime hour in those weeks.
Keep going
This guide summarizes federal FLSA regular rate rules for nonexempt employees. It is general information, not legal or payroll advice. State law and collective agreements can require more.
Content Lead, Anchor AI Tools, California, USA. Spotted an error? Email hello@anchoraitools.com and it will be checked and corrected. See our editorial standards.