If you earn commissions, shift differentials, or non-discretionary bonuses, the answer may surprise you.
In California, non-exempt, hourly-paid employees are entitled to overtime pay in certain circumstances. Most commonly, the right to overtime compensation is triggered when an employee works more than 8 hours in a day or more than 40 hours in a week, and double time kicks in when an employee works more than 12 hours in a day.[1] But what about how much overtime pay you’re entitled to? The answer to that question can be a little bit more complicated.
It’s common knowledge that overtime is paid out at 1 ½ times an employee’s regular rate of pay, and double time at 2 times an employee’s regular rate of pay. The key term here is “regular rate” –what exactly does that mean?
For employees that earn just one set hourly wage, and no other forms of compensation, it’s simple – the regular rate is their hourly rate. For example, an employee that earns $16.50 an hour will earn overtime at the rate of $24.75 an hour.
But what if that employee also earns commissions, shift differentials, or non-discretionary bonuses? These types of earnings must also be factored into the employee’s regular rate when calculating overtime if they are earned during the same pay period in which the overtime was worked.[2] Many employers underpay their employees by failing to follow this requirement. If you earn incentives like commissions, shift differentials, or non-discretionary bonuses, but your overtime rate is always calculated at 1 ½ times your base rate of pay, you may be entitled to additional compensation and penalties.
It is important to note that not all types of pay must be included in the regular rate of pay. For example, discretionary bonuses, gifts for special occasions, and expense reimbursements do not have to be included in the regular rate of pay for purposes of calculating overtime.[3]
Not all non-exempt employees are paid by the hour. Some are paid on a salaried basis or are paid by the piece or commission. Although the formulas for calculating the regular rate of pay vary, the principle that non-discretionary forms of compensation are to be included in the regular rate of pay when calculating overtime applies to all non-exempt employees.
If you have questions about your overtime earnings, get in touch by using our contact form or calling our office directly at 1-844-4-CA-WAGE.
