You’re likely familiar with the Fair Labor and Standards Act’s (FLSA’s) rules on overtime pay. But when you have employees who work varying schedules, you might be able to calculate overtime using the fluctuating workweek method.
Read on to learn more about a fluctuating workweek, restrictions, calculations, and how to implement it in your business.
What is a fluctuating workweek?
An employee who works a fluctuating workweek has a different amount of work hours from week to week. Some employees who work fluctuating workweeks earn a fixed salary, regardless of how many hours they work per week. For example, the employee would earn the same weekly salary whether they worked 35 or 40 hours. A salaried employee’s hourly rate varies depending on how many hours they work during one week.
Employees who work fluctuating workweeks might work more than 40 hours some weeks. Their overtime pay can be calculated using the fluctuating workweek overtime method.
As a reminder, traditional overtime is time and a half of an employee’s regular hourly rate. On the other hand, fluctuating workweek overtime is additional compensation of 0.5 times the employee’s hourly rate for each hour over 40 worked. You can opt to pay more than the minimum fluctuating workweek overtime rate of 0.5.
Can you use the fluctuating workweek method?
Not all employers whose employees work fluctuating workweeks can use the alternative overtime method.
You might be able to use the FLSA fluctuating workweek method if you meet the following requirements:
- The employee’s work hours fluctuate from week to week, meaning they work less than 40 hours some weeks
- The employee’s hourly wage is always above the minimum wage (either federal or state minimum wage, whichever is higher)
- The employee is non-exempt and salaried
- The employee earns a fixed salary, regardless of how many hours they work
- You pay the employee at least the fluctuating workweek overtime rate of 0.5 for each overtime hour worked
- Your state allows fluctuating workweek overtime
- The employee understands how they will be paid
The fluctuating workweek method is more appropriate in some industries than others, so be sure to check with a small business lawyer if you’re unsure.
Fluctuating workweek state law
Some states, such as Alaska, Pennsylvania, and California, restrict or prohibit the use of fluctuating workweek overtime. And, other states, like Connecticut, restrict fluctuating workweeks for commercial employees (e.g., retail).
Not all states explicitly allow or prohibit fluctuating workweeks. Some states that don’t allow this overtime method might not mention or allow it, so be sure to consult with your state.
Fluctuating workweek overtime calculation
To calculate an employee’s overtime rate, you must first calculate their hourly rate. You can find an employee’s hourly rate by dividing their weekly salary by the number of hours worked.
Next, multiply the employee’s hourly pay rate by 0.5 for each hour they worked over 40 during the workweek.
Lastly, add the employee’s fluctuating workweek overtime to their straight time to get their total weekly earnings.
Let’s say your employee works 35 hours one week, 40 hours the next, 37 hours the third week, and 45 hours the following week. You pay them a fixed rate of $800 per week.
If you want to determine the employee’s hourly rate from week to week, you can divide their weekly salary by hours worked:
- Week 1: $22.86 per hour ($800 / 35)
- Week 2: $20 per hour ($800 / 40)
- Week 3: $21.62 per hour ($800 / 37)
- Week 4: $17.78 per hour ($800 / 45)
You must calculate the employee’s overtime pay for the week they worked 45 hours.
To find the employee’s overtime rate, multiply their week 4 hourly rate of $17.78 by 0.5, or divide by two:
$17.78 X 0.5 = $8.89
Now, multiply the employee’s overtime pay by how much overtime they worked (5 hours):
$8.89 X 5 = $44.45
Finally, add the employee’s overtime pay and their fixed salary to get their total pay for the week:
$800 + $44.45 = $844.45
With overtime, you must pay the employee $844.45 for the week.
How to implement the fluctuating workweek method
Using the fluctuating workweek method can simplify your payroll. If you want to use this overtime alternative in your small business, be sure to do your due diligence:
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This is not intended as legal advice; for more information, please click here.