The Fair Labor Standards Act (FLSA) sets out regulations concerning the way employers pay their workers in terms of both the regular rate of pay and overtime pay.
In determining overtime pay for employees whose work schedule varies, employers can use the “fluctuating workweek method.”
FLSA basics
According to the FLSA, most employers must pay the federal minimum wage or more to their employees for all hours worked. They must also pay overtime at the rate of one-half the regular rate for hours worked over 40 hours in any workweek. Some company personnel are exempt from this, such as executive, administrative and highly compensated employees.
Fluctuating workweek and overtime
Schedules vary for some employees and the number of hours they work increases or decreases from week to week. This kind of schedule is called a fluctuating workweek and the employees receive a set salary no matter how many hours they put in each week. If they work more than 40 hours in a week, they receive overtime pay in addition to their regular pay. To calculate overtime, the employer divides the employee’s fixed weekly salary by the number of hours he or she worked over 40 hours.
One condition
In order to use the fluctuating workweek method, the parties must agree that the fixed salary is compensation for the number of hours the employee works each week. The employer may also provide incentive pay such as a bonus in addition to the fixed salary. Employers can rely on legal guidance to avoid FLSA missteps in payment rules and calculations for employees with fluctuating workweek schedules.