What Is Regular Rate of Pay — and Why Getting It Wrong Costs Employers Millions

California overtime is calculated on the “regular rate of pay” — and that rate is not always the same as the hourly wage. Employers who calculate overtime on base wages alone, while excluding bonuses and other compensation, are underpaying overtime.

What Goes Into the Regular Rate

The regular rate must include: the base hourly wage, non-discretionary bonuses, piece-rate earnings, and certain other payments. It excludes discretionary bonuses, overtime premiums already paid, and a few other categories. Getting the calculation wrong — even accidentally — generates liability for every overtime hour worked during the violations period.

Production bonuses are the most common trap. An employer who pays a $500 monthly production bonus to employees who regularly work overtime must recalculate overtime for every overtime hour worked that month. The math is real and the liability is real.

The California Wage Theft Recovery System gives workers the exact tools and templates to document violations, calculate what they’re owed, and file the right claims at the right agencies — without paying an attorney to get started. Request your free evaluation here.