Infinium HR Blog

In California, employees are entitled to various wage and hour mandates, including sick pay, overtime, and meal break violations. However, the calculation of these benefits often depends on an employee's regular rate of pay. Understanding the concept of the regular rate of pay is crucial for both employers and employees to ensure compliance with labor laws and fair compensation practices. Failure to include all forms of compensation in the regular rate of pay can lead to underpayment of overtime wages and legal violations.

What is the Regular Rate of Pay?

The regular rate of pay, as defined by California labor laws, represents an employee's average hourly wage, including all forms of compensation. This includes not only the base hourly wage but also other forms of compensation such as commissions, bonuses, and piece-rate earnings. To calculate the regular rate of pay accurately, employers must consider all forms of compensation earned by an employee during a specific workweek. Regular Rate of Pay = Total Compensation / Total Hours Worked.

The Infinium payroll system can automatically calculate the regular rate of pay and calculate and pay the proper amount as long as the commissions are paid along with the standard pay period in which it was earned. Please see below for information on how to calculate monthly commissions and bonuses.

Impact on Sick Pay

The regular rate of pay plays a crucial role in determining the rate at which sick pay is earned. Employees are generally entitled to their earned sick pay at their regular rate of pay.

Impact on Overtime

If an employee's compensation includes various components such as bonuses and commissions, these must be factored into the regular rate of pay when calculating overtime.

Impact on Meal Break Violations

Employees are entitled to one additional hour of pay at their regular rate for each day that a meal break is not provided.

How to Calculate with Monthly Commissions or Bonuses

One of the challenges with calculating overtime and sick pay is when monthly commissions of bonuses are paid as a result of the previous month’s activities. When you pay commissions that were earned the previous month, it’s necessary to retroactively calculate the overtime, sick time and meal break violations associated with the month in which the commissions or bonuses were earned. This requires a calculation outside the payroll system. Infinium can assist you with this by providing a spreadsheet that can be used to calculate the premium pay, and then you can apply it on the very next pay period manually in the payroll system.

Infinium Offers an Easy Solution

 The Infinium HR payrolls system, powered by isolved, can automatically calculate the regular rate of pay without lifting a finger. Commissions or bonuses earned, as well as multiple rates of pay, will be averaged by the system to create the regular rate of pay, which will automatically be applied to paid sick leave, overtime, and meal break violations. The key is however, this will only apply the regular rate of pay to those instances in the same week.

Applying regular rate of pay to monthly commissions or bonuses requires a calculation outside the payroll system. Infinium can assist you with this by providing a spreadsheet that can be used to calculate the premium pay, where you can subsequently apply the premium pay on the very next pay period manually.

Conclusion

Understanding the regular rate of pay is vital for both employers and employees in California to ensure compliance with labor laws. It impacts various aspects of compensation, including sick pay, overtime, and penalties for meal break violations. Employers must accurately calculate the regular rate of pay by considering all forms of compensation, and employees should be aware of their rights regarding fair and legal compensation practices.

 For more information on the regular rate of pay, please contact the HR pros at Infinium HR.

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