What is the regular rate vs total compensation concept in overtime?

• A. Regular rate is the base rate plus non-discretionary compensation; total compensation includes all applicable pay for overtime calculation.
• B. Regular rate includes discretionary bonuses; total compensation excludes bonuses.
• C. Regular rate is only base pay; total compensation equals gross pay.
• D. Regular rate and total compensation are the same.

Answer: (A)

The key idea is how overtime pay is calculated using a regular rate of pay. The regular rate is not just the base hourly wage. It’s the rate used to determine overtime, and it includes base pay plus non-discretionary compensation that is part of the employee’s guaranteed pay for the workweek. Discretionary bonuses are not included in this rate.

So, the regular rate equals the base rate plus non-discretionary compensation. The term “total compensation” in this context refers to all the pay elements that must be included when figuring that regular rate for overtime purposes. In other words, you take all applicable non-discretionary pay for the period, divide by the total hours worked to get the regular rate, and then apply 1.5 times that rate to overtime hours.

Example for context: if someone earns $15/hour base, $2/hour non-discretionary shift premium, and a $50 non-discretionary weekly bonus for 40 hours, the regular rate would be (15×40 + 2×40 + 50) ÷ 40 = 18.25 per hour. Overtime rate would be 1.5 × 18.25 = 27.38 per hour, and overtime pay for 10 hours would be about 273.75.

Why the other ideas don’t fit: discretionary bonuses aren’t included in the regular rate, regular rate isn’t limited to base pay, and it’s not the same as gross pay.