In California, the regular rate of pay is more than just an employee’s hourly wage—it’s the foundation for calculating overtime, meal/rest break premiums, and sick time for non-exempt employees. This rate ensures fair compensation and compliance with state labor laws.
It affects several types of pay including Overtime, Sick Pay, and Meal break Violations and it's critical that you understand this if you have any sort of variable pay, production bonuses or commissions.
What Does It Include?
The regular rate of pay starts with the base hourly wage but may also include additional forms of compensation such as:
Multiple Pay Rates: All wages earned according to multiple pay rates must be included
Non-Discretionary Bonuses: Performance-based incentives tied to measurable criteria.
Commissions: Earnings based on sales or production.
Piecework Earnings: Pay for each unit of work completed.
Shift Differentials: Extra pay for night shifts or other varying schedules.
What’s Excluded?
Not all payments are part of the regular rate of pay calculation. Discretionary bonuses, expense reimbursements, holiday gifts, and vacation or sick pay are generally excluded.
How Is It Calculated?
To determine the regular rate of pay, add up all applicable earnings (e.g., hourly wage, bonuses, commissions) and divide by the total hours worked during the pay period.
For example, if an employee earns $18/hour and receives a $50 performance bonus for a 40-hour week, their regular rate of pay is $19.25/hour ($18 + $50/40 hours).
By understanding the regular rate of pay, both employers and employees can ensure fair treatment and compliance with California labor laws. Proper calculation fosters transparency and reduces potential disputes in the workplace.
You can download our more detailed explanation of how to calculate the CA irregular Rate of Pay HERE, or contact the payroll experts at Infinium HR.