Pop Quiz: Hourly v. Regular Rate of Pay

For California employers, it is recommended to frequently audit your wage and hour practices to avoid claims. This includes assessing timekeeping practices, meal and rest issues, premium pay, reimbursement practices, and wage statement information. One critical component is ensuring you are paying the regular rate of pay (rather than just the base hourly rate) when required.

Let’s review when the regular rate of pay is triggered in California with this short pop quiz:

Question: In which situations must the regular rate of pay be used?

• Overtime
• Meal/Rest Premium Pay
• Paid Sick Leave (including a combined PTO policy)
• Reporting Time Pay
• All of the Above

Answer:  You guessed it—the answer is all of the above. This means that anytime additional non-discretionary earnings occur, beyond the base rate (e.g., commissions, shift differentials, non-discretionary bonuses, etc.), these earnings must be factored into the regular rate of pay in your payroll system.

Do not assume your payroll company has this handled, especially if they are not based in California. It is essential to follow up and confirm the math is correct.

Why is this so critical? In the world of wage and hour, the penalties for not paying an employee properly and timely stack up quickly. In addition to the unpaid dollar amount, the employer will also be on the hook for:

• A wage statement penalty of up to $50 per employee per pay period
• Waiting time penalties of up to 30 days for a deficient final paycheck
• 10% interest
• Plus potential PAGA penalties up to $100 per employee per pay period

Want more information on this topic?

CEA members may download our Regular Rate of Pay Fact Sheet for more information and see a variety of calculation examples on our HR Forms page.