How Is Overtime Paid?
Under most circumstances, overtime is paid at time and one-half the “regular rate of pay” for every hour worked in excess of 40 hours in a workweek. There are some exceptions to this rule. In certain situations, employees can legally be paid less then time-and-a-half for overtime hours. If an employee who is eligible for overtime receives commission as part of his compensation, his overtime pay only needs to include one-half the hourly amount he receives for commission (though his base pay, if he receives any, should still be paid at time-and-a-half). For example, if such an employee earns $1,000 in commission for a week in which he worked 50 hours, he is effectively earning $20/hour from the commission payment. He should be compensated for the 10 overtime hours he worked that week at one-half his commission rate, or $10/hour, in addition to overtime compensation for his base rate, if any.
Another method under which employees can be paid half-time for overtime hours is known as the “fluctuating workweek method.” Under this system, the employee must receive a fixed weekly salary for a work schedule that fluctuates from week to week, and the salary must be large enough that the employee receives at least the minimum wage for his longest workweeks. Additionally, there must be a “clear, mutual understanding” between the employer and the employee that the weekly salary is meant to compensate the employee for whatever number of hours the employee might work, whether many or few. If these requirements are met, the employee may be paid at the rate of one-half the effective hourly rate for his overtime hours.