Understanding the Regular Rate of Pay (RRP)

Last updated: February 6, 2026

When an employee works overtime, their "time-and-a-half" pay must be based on their Regular Rate of Pay, not just their base hourly rate. The RRP represents the "true" hourly cost of an employee for a specific workweek.

The RRP Formula

To calculate the RRP, you must total all "includable" earnings earned in a workweek and divide it by the total hours actually worked in that same week:

Regular Rate of Pay = Total Earnings (Includable) ÷ Total Hours Worked in the Workweek

Note: Overtime policies and RRP calculations are not applicable for exempt - “Annual Salary/No overtime” or “Salary” employees.

What’s Included vs. Excluded?

Not every dollar paid to an employee counts toward their RRP. See categorization of additional earnings below.

Included Earnings (Increases Overtime Pay)

  1. Adjustments: Retroactive pay, missed hours or pay period corrections.

  2. Allowances: Fixed stipends for expenses (e.g., car, phone or housing).

  3. Commissions: Variable pay for sales, productivity or performance.

  4. Non-Discretionary Bonuses: Bonuses promised for meeting specific goals or productivity.

  5. Shift Differentials: Extra pay for working nights or weekends.

Excluded Earnings (Does Not Affect Overtime Pay)

  1. Paycheck Tips: Reported customer gratuities.

  2. Severance Pay: Pay for employment termination.

  3. Expense Reimbursements: Payments for travel, meals, or tools.

  4. Discretionary Bonuses: On the spot bonuses for occasions, awards and referrals.

  5. Pay for Time Not Worked: Vacation, sick leave, or holidays.

  6. Gifts: Discretionary holiday or birthday gifts with no performance ties.

Workweek Allocation

You must record additional earnings by each specific workweek, which is a fixed and regularly recurring period of 168 hours - seven consecutive 24-hour periods. It doesn't have to coincide with the calendar week.

If you enter a lump sum for a multi-week pay period, the system may distribute those inputs evenly across the weeks. Because overtime is calculated on a weekly basis, failing to attribute earnings to the exact week they were earned can result in:

  • Inaccurate Overtime Totals: An employee might be underpaid in a high-overtime week and overpaid in a low-overtime week.

  • Compliance Fines: Incorrectly calculated RRP is a frequent cause of Department of Labor audits and penalties.

Example

If an employee earns $20/hour, works 45 hours, and earns a $100 commission in a single workweek:

  1. Total Base Pay: $20 * 45 = $900

  2. Commission: $100 

  3. Total Earnings: $900 + $100 = $1,000

  4. Calculate RRP: $1,000 ÷ 45 hours = $22.22/hour

  5. Overtime Premium: The employee is owed an additional 0.5x their RRP for the 5 hours of overtime: $11.11 * 5 = $55.55