Method Overview
This method increases predictability for both employers and employees. Employers benefit from lower overtime premiums in long workweeks because the overtime rate decreases as total hours increase. In contrast, employees receive a consistent weekly salary even in weeks under forty hours, helping offset the impact of working longer weeks at a decreasing hourly rate.
Increased Complexity
Calculations involving fluctuating hours require a new regular rate each week. In extreme cases, the calculated rate can fall below minimum wage. Tracking differences in hours and pay between employees, along with non discretionary bonuses, minimum wage thresholds, or highly compensated employee standards, can significantly increase model complexity.
Understanding The Details
The tool and graph below help conceptualize a single week of pay under the fluctuating workweek method. Notice how the regular rate and overtime premium decline as weekly hours increase, eventually falling below minimum wage.
Weekly salary Fixed weekly pay excluding any overtime premiums | |
Total weekly hours Used to calculate weekly pay for selected hours | |
Applicable minimum wage Used to test whether the regular rate remains compliant |
| Hourly rate | $20.00 |
| Overtime rate | $10.00 |
| Regular pay | $1,000.00 |
| Premium pay | $100.00 |
| Total pay | $1,100.00 |