Fluctuating Workweek Overtime Pay

Fluctuating workweek overtime pay is a way to comply with the overtime pay requirements of time and half pay for all hours worked in excess of 40 in a workweek when an employee’s time fluctuates from week to week. Employers whose employees work a lot of hours part of the year and very little hours a week another part of the year usually use it. For example, fluctuating workweek overtime pay is often used by lawn maintenance companies and by golf courses.

Fluctuating workweek overtime is legal as long as the following conditions are met:

  • The employee must be on a guaranteed weekly salary which is paid to the employee as long as the employee performs any work in the workweek. No pay is required for a workweek in which the employee is out for the entire workweek and performs no work in that workweek. Pay periods can still be bi-weekly, semi-monthly, or monthly; but the work hours have to be computed weekly to determine the hours worked each workweek. For this reason, we suggest that pay periods be either weekly or bi-weekly when an employee is on a fluctuating workweek overtime pay schedule so the pay periods will correspond with each workweek.
  • The hours of the employee must fluctuate from workweek to workweek. However, there are no rules as to how much or how little the hours must fluctuate from workweek to workweek.
  • The regular hourly rate of pay which is used to base the half time overtime rate must be at least the minimum wage which is currently $7.25 in North Carolina.

Here's how it works: Let's say an employee's guaranteed salary is $400.00 a week and the employee works 50 hours one workweek. The employer is to divide the $400.00 guaranteed weekly salary by 50 hours to get the regular hourly rate of pay for that workweek which computes out to be $8.00 an hour. In this example, the employee actually earned $8.00 an hour straight time rate for all the hours including the hours worked in excess of 40. Now the employer owes the employee the half time rate for the hours worked in excess of 40. In this example, it is for 10 hours. Please note that the overtime rate is a "time and a half rate" and the employee in this example has already received the "time rate" and is now due the "half rate" for the overtime hours worked in excess of 40. To do this, the employer is to divide the $8.00 rate in half which computes to $4.00 an hour for the "half rate" which is then multiplied by the 10 overtime hours which computes to $40.00 [$4.00 an hour X 10 hours = $40.00]. The employee is due an additional $40.00 gross for the 10 hours overtime worked in the workweek. In this example, the employee is due a total gross pay of $440.00 for all of the hours worked in the workweek for both the straight time hours and the overtime hours [$400.00 + $40.00 = $440.00]. The more hours worked in a workweek, the less the regular hourly rate of pay will be. The regular rate can go all the way down to the minimum wage, but that is it. Therefore, using the example of a guaranteed salary of $400.00 a week, the most the employee could work in a workweek under the fluctuating workweek overtime method for this example is 55 hours [$400.00 divided by $7.25 an hour = 55.17 hours]. The overtime half time pay cannot be a part of the $400.00 salary that is for the total straight time pay for all of the hours including the "straight time" pay for the hours over 40. The employee is still getting time and a half pay for the hours worked in excess of 40 in a workweek. Overtime hours are based on each individual workweek [each workweek stands on its own] and not by pay period or by month or by any other period of time. Therefore, an employer cannot base the overtime hours on the total hours worked in a bi-weekly or a semi-monthly pay period. To determine the number of overtime hours and for the calculation of overtime hours, each workweek stands on its own.

For more information about workplace rights, please contact our toll free number at 1-800-NC-LABOR (800-625-2267).