Final answer:
The 'regular rate' includes an employee's standard hourly wage plus additional compensation that must be considered when calculating overtime pay. An understanding of the regular rate is critical for ensuring proper overtime compensation in compliance with labor laws.
Step-by-step explanation:
The term "regular rate" as used in the calculation of overtime pay refers to an employee's standard hourly wage plus any other compensation that must be included when calculating overtime.
According to the Fair Labor Standards Act (FLSA), the regular rate should include certain types of bonuses, shift differentials, and incentive pay, among other things. It is important to note that not all payments to an employee are included in this rate; for example, gifts, discretionary bonuses, and payments for expenses are generally excluded.
To correctly calculate overtime, typically any hours worked over 40 in a workweek are paid at one and a half times the regular rate. Thus, understanding what constitutes the regular rate is critical to ensuring that employees receive proper compensation for their overtime hours. Employers must be diligent in including all the requisite compensation in this calculation to remain in compliance with labor laws.