Regular Rate of Pay (RRP)

Accurately paying overtime is critical for both employer compliance and employee protection under the FLSA.

Reasons to comply

• Complaints/Legal Claims: Employees can file a claim under the FLSA with the Department of Labor (DOL) Wage and Hour Division for up to 3 years if the violation was willful, and 2 years if not. Employees can file private actions in court seeking recovery of unpaid overtime, liquidated damages, interest, penalties, and other derivative claims. 
• Damages: Under the FLSA, employees can be awarded backpay, liquidated damages, fees, and costs in litigation.
• Penalties: Employers who willfully or repeatedly violate FLSA overtime requirements are subject to civil penalties of up to $2,451 per violation and willful violations may result in criminal prosecution and fines up to $10,000 and imprisonment up to 6 months for 2nd offenses.
• State Law Claims: In states with regular rate of pay requirements, employees can also bring claims with state agencies or in state courts. Those may carry different or additional causes of action including wage statements, record retention, damages, or penalties. 
• Record Retention: The FLSA requires that records detailing non-exempt employees’ hours worked and wages paid must be kept for no less than 3 years from the date of last entry.
  • Note: The court can use the employees’ accounting of hours worked in the absence of the employer’s record.

An employee’s regular rate is the hourly rate used to determine their overtime pay. It includes not only their base hourly wages, but also any eligible extra payments they might get.

If an employee is only paid an hourly wage, their regular rate is the same as that wage. However, if they're earning extra pay in addition to their hourly wage, this calculation is used to essentially convert the extra pay to an hourly rate (see the Federal Regulation on Overtime Compensation).

The RRP is found by dividing an employee's total compensation in a workweek by the total hours they worked in that workweek.

• Note: Some pay types do not count towards overtime pay, and should be excluded from the total compensation.

             Total Earnings* - Excluded Earnings*

RRP =     ------------------------------------

                        Total Hours Worked*

There are a few things you should do in Gusto to make sure an employee’s regular rate of pay is calculated accurately.

1. Sign in to Gusto.
2. Click the Pay section and select Pay settings.
   • Confirm the “Start of workweek” for each pay schedule is set to the desired weekday.
   • Make sure custom earnings are properly categorized to be included in or excluded from overtime pay.
3. While running payroll, record non-exempt employees’ eligible pay by the week it was earned.
   • For non-exempt employees with multiple jobs, the regular rate is based on a week-by-week weighted average formula across both jobs.

You’ll be able to record hours and earnings in payroll by week when it’s required to pay overtime accurately—that’s whenever a non-exempt employee works overtime and is getting an included pay type.

We recommend that you accurately allocate hours and earnings to stay compliant with labor laws. If you choose not to, what you enter will be evenly distributed across all weeks in the pay period, which could result in inaccurate pay and costly fines.

Note: If hours were synced from Gusto Time tracking, they'll automatically be recorded in the appropriate week.

Certain earning types in payroll are automatically defaulted to being included or excluded by Gusto in accordance with the Department of Labor (DOL). 

• If you’re creating a custom earning, you’ll have the ability to select whether that earning should be included or excluded from overtime pay.
• New earnings created and saved after the 30 days cannot be recategorized. If needed, they can be deactivated and new ones created.