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FastFactsFeature Presentation
April 24, 2012
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© 2012 The Johns Hopkins University. All rights reserved.
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Today’s TopicWe’ll be taking a look at…
Understanding and Calculating Regular Rate
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Today’s PresenterSue O’HareSr. Compensation Analyst
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Session Segments
PresentationSue will define “regular rate” and explain how to calculate it.During Sue’s presentation, your phone will be muted.
Q&AAfter the presentation, we’ll hold a Q&A session. We’ll open up the phone lines, and you’ll be able to ask questions. Sue will answer as many of your questions as time allows.
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Contact Us
If you would like to submit a question during the presentation or if you’re having technical difficulties, you can email us at: [email protected] can also send us an instant message!
GoogleTalk – [email protected] Instant Messenger – HopkinsFastFactsMSN – [email protected]
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Survey
SurveyAt the end of this FastFacts session, we’ll ask you to complete a short survey. Your honest comments will help us to enhance and improve future FastFacts sessions.
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Understanding and Calculating Regular Rate
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FastFacts Series on Compensation Topics
Four FastFacts SessionsLast month we discussed “Hours Worked & Time Off Plans”Summary:
Compensable work time under Fair Labor Standards ActRequired to pay non-exempt employees for all time workedUnderstanding what constitutes hours worked:
Wait time, on call time, meal & rest periods, sleep time, travel time, lectures, meetings, training, preliminary and postliminary activities
Time Off Plan – Allows time off during the same pay period in which the employee worked in excess of the standard work week
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1. Hours Worked & Time Off Plans
2. Understanding and Calculating Regular Rate
3. Tracking Time in E210 & Processing Overtime in SAP – May 10, 2012
4. Tracking, Calculating & Processing Overtime Scenarios – June 7, 2012
FastFacts Series on Compensation Topics
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Relevant JHU Terms
Standard/Base Hourly RateThe standard or base hourly rate is the straight time rate of pay (or straight pay) per hour, exclusive of any shift, overtime, or other premium pay.
Regular RateThe regular rate is defined as the hourly equivalent of all total earnings minus statutory exclusions.
Premium RateThe premium rate is a rate not less than one and one half times the employee’s regular rate of pay, for hours worked in excess of 40 in a workweek.
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Relevant Formulas
Total Standard/Base Pay = standard/base hourly rate x total hours workedTotal Earnings (minus exclusions) = total standard/base pay + inclusionsRegular Rate = total earnings (minus exclusions) total number of hours worked
Overtime Premium = regular rate x 1.5Overtime Pay = overtime premium x overtime hoursHoliday Premium = regular rate x 1.5Holiday Pay = holiday premium x holiday hoursTotal Weekly Pay = total earnings (minus exclusions) + overtime pay (+ holiday pay)
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Understanding Regular Rate
What is it and why is it important?Key concept – Rate used to calculate overtimeNon-exempt employees must be paid at a rate of one and one-half times the regular rate of pay for hours worked in excess of 40 hours per week. Generally, regular rate includes all payments made to or on behalf of employees (except for certain statutory exclusions discussed next).
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What’s Included in Calculating the Regular Rate?
Regular rate includes:All hourly wagesShift differentialsOn-call payEmployer-paid lunch or meals if not incurred on the employer’s behalf or for employer’s benefitBonuses promised for quantity and quality of work (e.g., incentive, sales commission, good attendance)
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What’s Not Included in Calculating the Regular Rate?
Examples of “statutory exclusions” include:Payments for time not workedDiscretionary bonuses Other premium payments Reimbursement for business expenses, e.g., tollsAmounts paid as gifts, not based on hours worked, production, or efficiencyEmployer-paid benefits
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How Is Regular Rate Calculated?
The Fair Labor Standards Act (FLSA) formula for determining the regular rate is:
total earnings (minus exclusions)total number of hours worked
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Regular Rate – Without Additional Pay
A straight-forward example without additional pay involved:Joanne, a non-exempt employee, is paid $400.00 per week for a normal 40 hour work week. Her standard base/hourly rate is $10.00 per hour. The formula for determining the regular rate is:
total earnings (minus exclusions)total number of hours worked
Regular rate = $400.00 total earnings ÷ 40 hours worked = $10.00/hour
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Regular Rate – Overtime & No Additional Pay
Joanne’s supervisor asked her to work 5 hours overtime to meet an important deadline. Joanne is a non-exempt employee whose standard work schedule is 40 hours a week. Her standard/base hourly rate is $10.00/hr.
Total hours worked (40 reg. hours + 5 OT hours) = 45 hours
Standard/base hourly rate = $10.00/hrTotal standard base pay ($10.00/hr x 45) = $450.00
Total earnings (minus exclusions) = total standard base pay + inclusions = $450.00 total standard base pay + $0 inclusions = $450.00
Regular rate = total earnings (minus exclusions) total number of hours worked = $450.00 ÷ 45 hours = $10.00/hr
Overtime pay ($10.00/hr regular rate x 0.5 x 5 OT hours) = $ 25.00Total Weekly pay ($450.00 total earnings + $25.00 OT pay) = $475.00
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Regular Rate with Other Pay
In next few slides, we’ll go over examples where the employee receives “other” payOther pay makes the calculation of regular rate a little bit more complicatedOther pay includes on-call pay, shift differential pay, premium pay, and bonuses
As a reminder, the Fair Labor Standards Act (FLSA) formula for determining the regular rate is:
total earnings (minus exclusions)total number of hours worked
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Regular Rate and Other Pay (On Call)
On-call pay is included as part of “regular rate” and is considered in calculating overtime. Assume non-exempt employee; 40 hour standard work schedule.
Total hours worked = 48 hoursStandard/base rate = $14.50/hrTotal standard/base pay ($14.50/hr x 48 hrs) = $696.00
Total on-call hours = 16 hoursOn-call rate = $4.50/hrTotal on-call pay ($4.50/hr x16 hrs) = $72.00
Total earnings (minus exclusions) = total standard base pay + inclusions = $696.00 total standard base pay + $72.00 on-call pay = $768.00
Regular rate = total earnings (minus exclusions) total number of hours worked
= $768.00 48 hours = $16.00/hr
Overtime pay ($16.00/hr regular rate x 0.5 x 8 OT hours) = $ 64.00Total Weekly pay ($768.00 total earnings + $64.00 overtime pay) = $832.00
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Regular Rate and Other Pay (Shift Differential)
Shift differentials are included as part of “regular rate” and are considered in calculating overtime. Assume non-exempt employee, 40 hour standard work schedule. Employee works a total of 42 hours during the evening shift.
Total hours worked = 42 hoursStandard/base rate = $14.50/hrTotal standard base pay ($14.50/hr x 42 hrs) = $609.00
Total shift differential hours = 42 hoursShift differential rate = $3.50/hrTotal shift differential pay ($3.50/hr x 42 hrs) = $147.00
Total earnings (minus exclusions) = total standard base pay + inclusions = $609.00 total standard base pay + $147.00 shift diff pay = $756.00
Regular rate = total earnings (minus exclusions) total number of hours worked
= $756.00 42 hours = $18.00/hr
Overtime pay ($18.00/hr regular rate x 0.5 x 2 OT hrs) = $18.00 Total Weekly pay ($756.00 total earnings + $18.00 overtime pay ) = $774.00
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Regular Rate with Holiday PayFrank is a non-exempt employee who works a 37.5 standard work schedule. He is asked to work on a holiday that falls within his normal work week. He is paid at the rate of one and one-half times his hourly rate for working the holiday.
Unlike On-call and Shift Differential pay, Holiday pay is NOT included in the calculation of an employee’s regular rate.
Total hours worked = 37.5 hoursStandard/base hourly rate = $20.00/hrTotal standard base pay ($20.00/hr x 37.5 hours) = $750.00
Total earnings (minus exclusions) = total standard base pay + inclusions = $750.00 total standard base pay + $0 inclusions = $750.00
Regular Rate = total earnings (minus exclusions) total number of hours worked
= $750.00 37.5 hours = $20.00/hr
Holiday pay ($20.00 /hr regular rate x 1.5 x 7.5 hrs holiday hours worked) = $225.00Total Weekly pay ($750.00 total earnings + $225.00 holiday pay) = $975.00
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Regular Rate – Two Standard/Base Rates (Weighted Average)
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Rate-In-Effect: Alternate Method for Calculating Overtime
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Summary
Here’s a list of all the terms that we covered in today’s presentation:
Total Standard/Base PayTotal Straight Pay (or straight pay)Regular RateOvertime Premium Overtime PayHoliday PremiumHoliday PayRate-in-EffectTotal Weekly Pay
Formulas are provided in the job aid included with this presentation
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Summary
In summary:Regular rate is the basis for calculating OT pay.Regular rate is not always the same as an employee’s standard/base hourly rate.Pay received for other things may need to be included in calculating an employee’s regular rate.
To ensure correct payment of OT, you must:Know what constitutes Hours Worked & count them correctlyKnow how to calculate an employee’s regular rate
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Upcoming FastFacts
Please mark your calendars and remember to join us for these future FastFacts, when we’ll cover these topics:
Tracking Time in E210 & Processing Overtime in SAP – May 10, 2012
Tracking, Calculating & Processing Overtime Scenarios – June 7, 2012
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We’re going to open the phone lines now!
There will be a slight pause, and then a recorded voice will provide instructions on how to ask questions over this conference call line.
We’ll be answering questions in the order that we receive them.
We’ll also be answering the questions that were emailed to us during the presentation.
If there’s a question that we can’t answer, we’ll do some research after this session, and then email the answer to all participants.
Q&A
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Thank You!
Thank you for participating!We would love to hear from you.
Are there certain topics that you would like us to cover in future FastFacts sessions?Would you like to be a FastFacts presenter?Please email us at: [email protected]
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Survey
Before we close, please take the time to complete a short survey.Your feedback will help us as we plan future FastFacts sessions.Click this link to access the survey… http://connect.johnshopkins.edu/fastfactssurvey/
Thanks again!
