Q&A: FLSA and the Regular Rate of Pay

This Q&A is provided to address common questions HR Services consultants receive about the regular rate of pay.

A fundamental factor when calculating overtime payments for nonexempt staff is the employee’s regular rate of pay. The regular rate of pay is the average hourly rate of pay for the workweek.

Questions and Answers

Q: What types of compensation must be included in the regular rate calculation?

A: The regular rate includes all payments made by the employer to, or on behalf of, the employee, with the exception of certain allowable exclusions. Examples of additional compensation that must be included in the regular rate calculation are:

• Bonuses awarded for attendance, performance, or retention, or any bonus payment that is not discretionary on the part of the employer
• On-call pay
• Salary increases, including retroactive pay raises
• Longevity pay
• Stipends for extra work such as coaching
• Employer contributions to “cafeteria” plans, health insurance, etc., if the employee has a choice of receiving the contribution, in whole or in part, as direct compensation

Any bonus, stipend, or payment that is paid as part of an agreement or promise by the employer or as an incentive must be included in the regular rate of pay calculation. When the bonus is earned in a single workweek, the bonus is added to the other weekly earnings of the employee and divided by the total hours worked to determine the regular rate of pay. Often, additional payments are earned over several workweeks. When this is the case, the total amount should be distributed among all weeks where work was performed, added to the other earnings, and divided by the total hours worked to determine the regular rate of pay.

Q: Do cell phone stipends need to be included in the regular rate of pay?

A: Cell phone stipends are considered reimbursement for business expenses and may be excluded from the regular rate of pay.

Q: What is the best practice for paying an instructional aide who is coaching a sports team?

A: The best practice is to pay an hourly rate and time and a half for all hours worked over 40 in any workweek. Under Department of Labor (DOL) regulations, districts are not allowed to pay a stipend instead of overtime. To maintain equity, consider using the stipend amount as a “bank account” and draw from it as the employee submits hours worked.

Q: Do one-time stipends (e.g., UIL coach) need to be included in the regular rate of pay for a nonexempt employee?

A: Yes, the same Fair Labor Standards Act (FLSA) rules apply. Stipends must be included in the employee’s regular rate of pay. Overtime rules for all hours worked over 40 in a workweek apply. Like coaching stipends, UIL stipends should be included in the regular rate of pay for the period of time they are intended to cover.

Q: Do retention incentives or longevity stipends need to be included in the regular rate of pay for nonexempt employees?

A: Most likely, yes. If the incentive payment is made according to a prior contract, agreement, or promise that causes the employee to expect the payment regularly, it must be included in the regular rate of pay.

Q: A nonexempt employee receives a monthly stipend for additional duties that are completed during their regular work schedule. Should this stipend be included in their regular rate of pay?

A: That stipend would need to be included in the regular rate of pay. A better practice would be to reconsider the employee’s job description if the duties are a permanent part of the job. If the added duties require skills at a higher level than the current job, consider upgrading the job and following your normal promotion procedures to raise the employee’s pay. If the added duties are just occasionally needed (e.g., translation services), consider paying a higher hourly rate within the pay range as compensation for the additional skills required.

Additional Resources

TASB HR Services offers several resources related to the FLSA.

Training opportunities include:

• Online course: Understanding the Fair Labor Standards Act available in the TASB Online Learning Center
• Statewide virtual training: Understanding Wage and Hour Law, May 8-9, 2024
• Recorded webinars:
  • Calculating Overtime for Nonexempt Employees
  • Child Labor Laws and Student Workers
  • Pregnant Workers Fairness Act (PWFA) and the PUMP Act
  • Top 10 FLSA Mistakes to Avoid

Other helpful resources include:

• HRX articles: Search TASB News and Insights for “FLSA” using the search bar
• HR Services’ book: The Administrator’s Guide to the Fair Labor Standards Act
• Department of Labor webpage: Overview of the Regular Rate of Pay Under the FLSA