FLSA Overtime Calculator Advisor
Some of the terms and phrases used in this Advisor have particular meanings that are specific to the FLSA overtime regulations. These terms are defined here for your convenience. As you run the Advisor, you will have the opportunity to return to the Glossary when these terms are used.
Compensatory Time Off
Direct Cash Wages
Federal Minimum Wage
Salary for Fluctuating Hours
A bi-weekly pay period is one that occurs every two weeks (26 pay periods a year). Its pay day is on the same day every other week (for example, every other Friday). A bi-weekly pay period usually includes two full workweeks.
A commission is a sum of money paid to an employee based on the sale of a certain amount of goods or services. Commissions may be paid in the form of compulsory (or mandatory) service charges expressed as a specific percentage of the customer’s bill (for example, charges imposed when a hotel rents out banquet facilities to a group). A commission may be paid in addition to or instead of any other method of pay.
Some commission agreements include a "draw" on commissions. A draw is a fixed sum of money paid in advance of the settlement date for the earned commission pay. Draws usually bear a fixed relationship to the amount of commission payments which, based on experience, the employee may be expected to earn for the period. Draws are usually paid weekly, bi-weekly, or at some other fixed interval.
Compensatory Time Off
Compensatory time off (comp time) is paid time off the job that is earned and accrued by an employee instead of immediate cash payment for working overtime hours. The use of comp time instead of overtime is limited by Section 7(o) of the FLSA to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency.
A covered employee is one who is entitled to FLSA minimum wage, overtime pay, recordkeeping, and child labor protections. For more information see Fact Sheet #14: Coverage Under the Fair Labor Standards Act or visit the interactive FLSA Coverage and Employment Status Advisor.
A day rate is a flat sum paid for a day’s work without regard to the number of hours worked in that day.
Deferred compensation is pay that is delayed past the normal pay date and is paid at a later time.
Direct Cash Wages
Direct cash wages are wages paid at an hourly rate by an employer directly to a tipped employee. Tips are not part of an employee's direct cash wages.
The FLSA defines employee as "any individual employed by an employer. "Employ" is defined as including "to suffer or permit to work." The concept of employment in the FLSA is very broad and is tested by "economic reality." Factors such as the place where the work is performed, the absence of a formal employment agreement, the time or method of payment, and whether an individual is licensed by the state or local government have no bearing on whether an individual is an employee under the FLSA. For more information see Fact Sheet # 13: Employment Relationship Under the Fair Labor Standards Act or visit the interactive FLSA Coverage and Employment Status Advisor .
An exempt employee is one who is not entitled to the minimum wage and/or overtime pay protections of the FLSA.
Federal Minimum Wage
The Federal minimum wage provisions for covered, nonexempt employees are contained in the Fair Labor Standards Act (FLSA). The Fair Minimum Wage Act of 2007 included phased increases to the Federal minimum wage.
- For work performed prior to July 24, 2007, the Federal minimum wage is $5.15 per hour.
- For work performed from July 24, 2007 to July 23, 2008, the Federal minimum wage is $5.85 per hour.
- For work performed from July 24, 2008 to July 23, 2009, the Federal minimum wage is $6.55 per hour.
- For work performed on or after July 24, 2009, the Federal minimum wage is $7.25 per hour.
In addition, the Fair Minimum Wage Act of 2007 brought about phased increases in the minimum wage in American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI). For more information on the minimum wage in American Samoa or the CNMI, contact your local Wage and Hour Division office.
In general, hours worked includes all time an employee must be on duty, or on the employer's premises or at any other prescribed place of work. Also included is any additional time the employee is suffered or permitted (i.e., allowed) to work. For more information see Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act or visit the interactive FLSA Hours Worked Advisor.
A job rate is a flat sum paid for doing a particular job without regard to the number of hours worked at that job.
A nonexempt employee is one who is entitled to the minimum wage and/or overtime pay protections of the FLSA.
Overtime pay is the extra pay employers are required by the FLSA to pay to covered, nonexempt employees for the hours they work in excess of 40 in a workweek. Overtime pay must be computed at one and one-half times the employee’s regular rate of pay. Extra pay for overtime hours worked may also be called an "overtime premium" payment.
The pay period is the period of time in which compensation was earned for hours worked.
A piece rate is a fixed amount paid per each item (dozen, gross, etc.) produced (manufactured, sold, etc.).
Generally, the regular rate includes all payments made by the employer to or on behalf of the employee (except certain statutory exclusions ). The regular rate is determined by adding together the employee’s pay for the workweek and all other earnings and dividing the total by the number of hours the employee worked in that week.
Retroactive pay is pay that is related to a prior time period (for example, a pay increase resulting from a collectively bargained or other agreement, that was paid at a later time than the effective date of the pay increase).
A salary is a predetermined amount of pay and is generally expressed as an amount paid weekly, bi-weekly, semi-monthly, monthly or yearly. A salary may be intended to cover straight-time pay for a predetermined number of hours worked during the period, or it may be intended to cover straight-time pay for all hours worked during the period.
Salary for Fluctuating Hours
A salary for fluctuating hours is a predetermined amount of pay which, based on an understanding between employer and employee, is intended to cover straight-time pay for whatever hours the employee is called upon to work in a workweek, whether few or many.
A semi-monthly pay period is a one that occurs twice a month (24 pay periods a year). For example, Pay Period 1 may begin on the first of the month and end on the 15th and Pay Period 2 begins on the 16th and ends on the 30th or 31st. A semi-monthly pay period will include full and partial workweeks.
A shift differential is an additional amount of pay received for working designated shifts. A shift differential is usually paid as an additional amount per hour. For example, an employee may receive an additional $0.75 per hour for each hour worked on the midnight shift.
Straight-time pay is the employee's earnings before the overtime premium payment is calculated.
A task rate is a flat sum paid for doing a particular task without regard to the number of hours worked at that task.
Tipped employees are those who work in occupations in which they customarily and regularly receive more than $30 a month in tips. An employer may count tips actually received by tipped employees as wages when calculating wages for purpose of FLSA minimum wage and overtime pay requirements. This is known as a “tip credit.” However, the employer must pay not less than $2.13 an hour in direct cash wages. Note that some states require direct wages of more than $2.13 an hour. Please refer to the Minimum Wages for Tipped Employees chart for more information.
An employer who chooses to use the tip credit provision must inform each tipped employee about the tip credit allowance; be able to show that the employee receives at least the Federal minimum wage when direct wages and the tip credit allowance are combined; and allow the tipped employee to retain all tips, except to the extent the employee participates in a valid tip pooling arrangement. If the employee’s tips, combined with the employer’s direct wages, do not equal at least the Federal minimum wage for each hour worked in a tipped occupation, the employer must make up the difference. The tip credit claimed during overtime hours may not be different from the tip credit claimed for straight-time hours.
A compulsory, or mandatory charge for service (for example, 15 percent of the customer’s bill) is not a tip. Such charges are part of the employer’s gross receipts. Therefore, the employer has complete discretion in choosing the manner in which the compulsory charge is used, including whether or not to use it to pay his or her employees. When an employee is paid by the compulsory service charge, the payment to the employee is considered a commission payment and not a tip.
When tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage. The amount due to the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.
For more information on tips, see Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act.
Tip pooling is an arrangement among employees who customarily and regularly receive tips to “pool” or share a customary and reasonable percentage of their tips received with others in the pool. The following occupations have been recognized as falling within the eligible category for tip pooling: waiters and waitresses, bellhops, counter personnel who serve customers, busboys/girls, and service bartenders. Tipped employees may not be required to share their tips with employees in occupations which have not customarily and regularly participated in tip pooling arrangements, such as janitors, dishwashers, chefs or cooks, and laundry room attendants.
A workweek is a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods. The workweek does not have to coincide with the calendar week, but instead it may begin on any day of the week and at any hour of the day. The workweek is the basis on which determinations of employee coverage, the application of most exemptions, and compliance with the wage payment requirements of the FLSA are made. Once the beginning time of an employee’s workweek is established, it remains fixed regardless of the hours the employee is scheduled to work. However, the beginning of the workweek may be changed if the change is intended to be permanent and is not designed to evade the overtime requirements.