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California regular rate of pay: assembling the calculation
The regular rate can include more than the base hourly wage. Collect all relevant earnings and the period they belong to before calculating overtime or reviewing a premium payment.
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General information, not legal or tax advice.
Gather every included earnings component
DIR says the regular rate includes hourly earnings, salary, piecework and commissions, with shift differentials and applicable non-hourly compensation included in an hourly worker’s rate. List each pay component and its earning period. Ask for review when the compensation arrangement does not fit the ordinary payroll setup.
Sources: DIR Labor Commissioner's Office (DLSE) FAQ - Overtime
Use the appropriate method for salary or multiple rates
DIR converts monthly nonexempt salary to annual pay, divides by 52 for weekly pay, then by 40 for the regular hourly rate. For multiple rates, it describes a weighted average of total weekly earnings over total hours. Preserve the underlying earnings and hours rather than averaging the stated rates directly.
Sources: DIR Labor Commissioner's Office (DLSE) FAQ - Overtime
Distinguish flat-sum and production bonuses
DIR uses different denominators for flat-sum and production bonuses: legal regular hours for the former and total hours worked for the latter. The overtime treatment also differs. Give payroll the bonus terms and earning period before running a recalculation, with counsel reviewing ambiguous compensation promises.
Sources: DIR Labor Commissioner's Office (DLSE) FAQ - Overtime
Review exclusions and premium wording
DIR lists exclusions such as qualifying gifts, expense reimbursements and discretionary bonuses. Its meal and rest guidance uses regular-rate compensation for premiums. Do not classify a payment merely by its payroll label; retain the policy or approval showing what the payment actually represents.
Sources: DIR Labor Commissioner's Office (DLSE) FAQ - Overtime; DLSE FAQ - Rest Periods
Sources: gather every included earnings component
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