Overtime Premium Calculation Review

As part of our OBBBA audit efforts, we are reviewing earnings and hour accumulators used to calculate overtime premiums. To ensure calculations are as accurate as possible, please review your earnings and hour codes and identify which should be included in the categories below.

Please note: The information below is intended as general guidance based on Fair Labor Standards Act (FLSA) regulations. Employers are responsible for determining which earnings and hours should be included based on their pay practices and any applicable federal, state, or local laws.

1. FLSA Hours Worked

For FLSA overtime purposes, "hours worked" generally include all time an employee is required or permitted to perform work for the employer.

Hours Worked Generally Include

• Regular working time
• Required meetings
• Required training (in many cases)
• Travel between job sites during the workday
• Time spent performing work before or after a scheduled shift
• Certain on-call time when employee activities are significantly restricted by the employer

Hours Worked Generally Do Not Include

• Vacation hours
• PTO hours
• Sick leave hours
• Holiday hours not actually worked
• Jury duty leave
• Bereavement leave
• Other paid leave hours when no work is performed

Reference:

• Fair Labor Standards Act (FLSA)
• 29 CFR Part 785 – Hours Worked
• U.S. Department of Labor Wage and Hour Division

2. Earnings Included in the FLSA Regular Rate of Pay

The FLSA requires certain earnings to be included when determining an employee's Regular Rate of Pay, which is used to calculate overtime premiums.

For purposes of this review, please identify earnings codes that should be included when calculating an employee's FLSA Regular Rate of Pay.

Generally Included

• Regular wages
• Salary earnings
• Shift differentials
• Lead pay
• Hazard pay
• Non-discretionary bonuses (attendance, production, performance, retention, etc.)
• Commissions
• Piece-rate earnings
• Most incentive pay
• On-call pay tied to work performed

Generally Excluded

• PTO pay
• Vacation pay
• Sick pay
• Holiday pay for time not worked
• Discretionary bonuses or gifts
• Expense reimbursements
• Employer contributions to benefit plans
• Payments specifically excluded under FLSA Section 7(e)

Common Earnings Code Examples

The chart below provides general guidance for commonly used earnings types. Actual treatment may vary based on how the earning is structured and paid.

Reference:

• FLSA Section 7(e)
• 29 CFR Part 778 – Overtime Compensation
• U.S. Department of Labor Fact Sheet #56A – Regular Rate of Pay

3. Overtime and Premium Earnings Identification

To support OBBBA processing, please identify all earnings codes that represent overtime or premium pay paid at a rate of 1.5 times an employee's regular rate of pay or greater.

Because earnings titles and pay practices vary by employer, some qualifying earnings may not be clearly labeled as "Overtime" or "Double Time" within the payroll system.

Examples of earnings that may require review include codes containing terms such as:

• Premium
• OT
• DT
• Holiday Worked
• Weekend Pay
• Special Pay

This information will help ensure qualifying overtime premium amounts are identified appropriately for OBBBA reporting and processing purposes.

What We Need From You

Please review your earnings and hour codes and identify:

Hours Worked

Which hour codes should be included as FLSA Hours Worked for overtime purposes?

Regular Rate Earnings

Which earnings codes should be included when determining an employee's FLSA Regular Rate of Pay?

Overtime Earnings

Please review your earnings codes and identify any earnings that are paid at 1.5x the employee's regular rate of pay or higher, even if the earnings description does not specifically reference overtime.

This information will help ensure the overtime premium portion of overtime earnings is calculated and reported appropriately under OBBBA requirements.

If you are uncertain whether a particular earning or hour code should be included, we recommend consulting your legal counsel, HR compliance team, or labor law advisor before making a final determination.