Commission changes the regular-rate math, and Everhour keeps hours, budgets, and review workflows tied to the same records.
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This calculation answers how much overtime premium is due when a covered nonexempt employee earns hourly pay plus commission in the same FLSA workweek. Under the federal baseline, overtime applies to hours worked over 40 in a fixed 168-hour workweek, and the overtime rate must be at least 1.5x the employee's regular rate of pay.
The key detail is that the regular rate is not always the base hourly wage. It is total compensation for the workweek, excluding statutory exclusions, divided by total hours actually worked in that workweek. If commission is part of that workweek's compensation and is not excluded, it changes the regular rate before the overtime premium is calculated.
Start by assigning the commission to the workweek it covers. Do not average hours across two or more FLSA workweeks to reduce overtime, because each workweek stands alone. Also do not treat paid vacation or holiday time not worked as hours worked under the federal baseline; those payments are generally controlled by policy, contract, representative agreement, or state law.
A common mistake is calculating overtime at 1.5x the base wage while leaving commission outside the rate. That understates pay when the commission belongs in the regular-rate base. More protective state rules can require a greater benefit, so use the federal method as the baseline and then apply any state, policy, or contract rule that gives the employee more.
Use this sequence: base earnings plus included commission equals total compensation; total compensation divided by total hours worked equals the regular rate; overtime hours multiplied by one-half the regular rate equals the added overtime premium when straight time has already been paid for all hours worked.
Example: a covered nonexempt employee works 42 hours in one FLSA workweek at $20 per hour and earns a $210 commission for that same workweek. Base earnings are $840, total compensation is $1,050, and the regular rate is $25. The employee has 2 overtime hours, so the added overtime premium is $25. Total gross pay for the week is $1,075.
A one-off calculation is enough when you have one employee, one workweek, clear hours, and a commission amount that already belongs to that same week. It is also enough for checking a pay stub line or explaining why commission raises the overtime premium even when the base hourly wage stays the same.
A managed workflow matters when commissions arrive later, time entries need approval, or project budgets depend on labor cost. Everhour Project Budgeting tracks time and money budgets, recurring budget periods, threshold email alerts, and budget protection, so overtime-related labor cost can be reviewed before it affects payroll, billing, or project margins.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
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Commission belongs in the regular-rate calculation when it is compensation for the workweek and is not a statutory exclusion. The regular rate is total compensation for the workweek divided by total hours actually worked in that workweek. That rate then drives the federal overtime premium for covered nonexempt employees who work over 40 hours.
Assign the commission to the workweek it covers, then recalculate the regular rate for that workweek. The FLSA workweek is a fixed 168-hour period, and each workweek stands alone. A later commission payment does not allow the employer to average hours across multiple workweeks to avoid overtime.
Use the commission-adjusted regular rate when the commission belongs in total compensation and is not excluded. If straight time has already been paid for all hours, the remaining federal overtime amount is the extra half-time premium for hours over 40, calculated from the regular rate.
Under the federal baseline, covered nonexempt employees receive overtime pay only for hours worked in excess of 40 in the workweek. Commission can raise the regular rate, but it does not create overtime by itself when the employee works exactly 40 hours or fewer in that fixed workweek.
The FLSA does not require overtime pay merely because work occurs on Saturdays, Sundays, holidays, or regular days of rest. For the federal baseline, the trigger is hours worked over 40 in the workweek unless a more protective state law, policy, contract, or agreement provides a greater benefit.
Everhour Project Budgeting connects tracked labor time to hour-based or money-based budgets, with recurring budget periods and threshold email alerts at 75%, 90%, and 100%. That gives managers a budget view before commission-adjusted overtime cost pushes a project past its planned limit.
Track approved hours against project budgets before payroll review. Everhour gives teams recurring budgets, threshold alerts, and budget protection tied to tracked time and labor cost.
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