As the holiday lights start to fade, we come to one of the most anticipated times of the year – bonus season!

Such a happy time. Who doesn’t love getting a bonus, and what employer doesn’t like rewarding good performance with some extra monetary recognition? Bonuses are great, but keep in mind that they also

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Note – This post has been updated to correct a calculation error noted below.

The impending increase in the minimum salary for the executive, administrative and professional exemptions under the FLSA has many employers looking for ways to manage overtime costs for newly-reclassified employees. As part of that search, you might have heard of this idea called the “fluctuating workweek method” for calculating overtime as one alternative that can yield major savings. So what is this method, and how does it work?


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lunch9568375.jpgQ. We offer free lunches to our food service employees. Can we count the cost of these lunches as part of our employees’ compensation?

A. The short answer is yes, but as we all know, there’s no such thing as a free lunch, particularly in the world of wage and hour law. To explore the right way to do this, it’s helpful to take a look at some common mistakes that employers make. 

Suppose Jerry works at Bob’s Steak ‘N Beans as a line cook. Bob’s is located in Illinois, so the minimum wage for non-tipped employees is $8.25 per hour. Suppose Jerry works 45 hours over 5 work days in a week. For that week, he would be entitled to straight-time wages of $371.25. However, rather than paying that full amount in cash, Bob provides Jerry with a free Steak ‘N Beans Bonanza platter each day for lunch. The menu cost of the platter is $15, so Bob deducts $15 per day from Jerry’s pay, leaving him with $296.25 in straight-time pay. On Thursday, Jerry brought a salad from home, but Bob still charged him for the platter since it was available to Jerry even if he didn’t eat it. (Bob ended up serving it to a customer.) Bob didn’t just fall of the turnip truck, so he knows that he also has to pay Jerry overtime for 5 hours. So Bob takes Jerry’s total straight-time wages ($296.25), divides by 45, and divides by two to get an overtime premium rate of $3.29 per hour. Multiplied by five hours, he gets $16.46. Adding that amount to Jerry’s straight-time pay, Bob comes up with a total of $312.71. 

Can anyone spot the problems here?


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In our last post, we discussed the calculation of the “regular rate” and some of the complexities of determining what constitutes “remuneration” under the Fair Labor Standards Act (FLSA). Commission is one of the additional forms of compensation that you must include in a non-exempt employee’s regular rate. Such a calculation is relatively straightforward

CalculatorQ. We have a number of non-exempt employees who are nevertheless paid a salary. How do we calculate overtime for these employees? 

A. The question above is a positive sign, because if you find yourself asking it you’ve passed the first hurdle of realizing that not all “salaried” employees are exempt from the overtime requirements of the Fair Labor Standards Act. 

Generally speaking, calculating overtime is a simple affair. Employees must be compensated for hours worked in excess of forty hours in a single workweek at a rate of one and one-half times the employee’s regular hourly rate of pay. The “regular rate” is calculated by dividing an employee’s total non-overtime compensation for the week by the total number of hours worked. For employees who are paid a simple hourly rate, this calculation is simple, as the regular rate is simply the employee’s normally hourly rate of pay.

However, things get trickier when a non-exempt employee is paid a salary. Suppose Chuck is paid a salary of $1000 per week. He works 50 hours in a certain week – 40 hours of straight time, and 10 hours of overtime. To calculate Chuck’s overtime pay, you need one more crucial piece of information: how many hours is the $1000 salary intended to cover? 


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