Non-Cash Benefits Should be Included in the Regular Rate of Pay

January 26, 2018

Most employees understand that overtime, or hours worked over forty (40) in a workweek, must be paid at a higher rate of pay than non-overtime hours.  Many employees even know that the proper overtime rate is supposed to one and a half times their regular rate of pay.  But, did you know that “regular rate of pay” is often not the same as an employee’s hourly rate?  For example, just because an employer pays an employee ten dollars per hour ($10/hour) for hours 1 to 40 in a workweek does not automatically mean that hours over 40 will be paid at fifteen dollars per hour ($15/hour).

The Fair Labor Standards Act (FLSA) and many related state laws define the “regular rate of pay” to include all remuneration paid to an employee in a given week.  This means that an employee may be required to modify the employee’s hourly rate when calculating the regular rate to account for bonuses, shift differentials, commissions, or other cash payments made to the employee.  The FLSA also requires that certain non-cash payments be included in the regular rate of pay.

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People often ask questions like:

  • What are non-cash payments?
  • How do I compute my proper overtime rate?
  • How can I tell if I’m being shorted wages?
  • Do overtime lawyers charge money up front?

Starting with the first questions –  Some common examples of common non-cash payments are lodging, such as providing the employee with an apartment or other living space at a free or discounted rate, meals, and other goods.  The FLSA asks whether the furnishing of these non-cash benefits are customarily provided by the employer to the employee in determining whether it counts as a wage for purposes of calculating the regular rate of pay.  For example, an employer buying pizza on an occasional Friday likely is not a non-cash payment, but an employer providing employees with meals every day may rise to constituting a non-cash payment.

The FLSA requires that the fair value or reasonable cost of these non-cash payments be considered as part of the overall payment to the employee and thus increase the regular rate and the resulting overtime rate.

Experienced wage and hour attorneys can help you evaluate your pay and whether you are entitled to a higher overtime rate than you currently receive. Also, there are various state wage and hour laws that may afford even greater protections or calculation of rates.  For example, New York State has a spread of hours law, and for hourly employees who work over 10 hours in a day, they must be paid an additional hour of pay.  That is why it’s a good practice to speak with an employment law firm who can advise you whether you’re paid properly, and most FLSA lawyers will do so on a contingency basis, meaning they’re only paid if they win your overtime lawsuit.