Regular Rate of Pay (RRP)

Accurately paying overtime is critical for both employer compliance and employee protection under the FLSA.

Reasons to comply

• Complaints/Legal Claims: Employees can file a claim under the FLSA with the Department of Labor (DOL) Wage and Hour Division for up to 3 years if the violation was willful, and 2 years if not. Employees can file private actions in court seeking recovery of unpaid overtime, liquidated damages, interest, penalties, and other derivative claims. 

• Damages: Under the FLSA, employees can be awarded backpay, liquidated damages, fees, and costs in litigation.

• Penalties: Employers who willfully or repeatedly violate FLSA overtime requirements are subject to civil penalties of up to $2,451 per violation and willful violations may result in criminal prosecution and fines up to $10,000 and imprisonment up to 6 months for 2nd offenses.

• State Law Claims: In states with regular rate of pay requirements, employees can also bring claims with state agencies or in state courts. Those may carry different or additional causes of action including wage statements, record retention, damages, or penalties. 

• Record Retention: The FLSA requires that records detailing non-exempt employees’ hours worked and wages paid must be kept for no less than 3 years from the date of last entry.

  • Note: The court can use the employees’ accounting of hours worked in the absence of the employer’s record.

An employee’s regular rate is the hourly rate we use to calculate overtime. It includes base pay and eligible extra pay. Extra pay can be given at any point, and if it overlaps with a workweek or pay period, it can change the overtime premium.

If an employee is only paid an hourly wage, their regular rate is the same as that wage. However, if they're earning extra pay in addition to their hourly wage, this calculation is used to essentially convert the extra pay to an hourly rate (see the Federal Regulation on Overtime Compensation).

The RRP is found by dividing an employee's total compensation in a workweek by the total hours they worked in that workweek.

Note: Some pay types do not count towards overtime pay, and should be excluded from the total compensation.

             Total Earnings* - Excluded Earnings*

RRP =     ------------------------------------

                        Total Hours Worked*

FLSA status

Employee type in Gusto

Eligibility for Gusto's RRP

Non-exempt

• Salary/Eligible for overtime

• Hourly/Eligible for overtime

• Commission only/Eligible for overtime

Eligible if on a weekly, bi-weekly, or semi-monthly pay schedule

Exempt

• Salary/No overtime

• Commission only/No overtime

Not eligible

There are a few things you should do in Gusto to make sure an employee’s regular rate of pay is calculated accurately.

1. Sign in to Gusto.

2. Click the Pay section and select Pay settings.

   • Confirm the “Start of workweek” for each pay schedule is set to the desired weekday.

   • Make sure custom earnings are properly categorized to be included in or excluded from overtime pay.

3. While running payroll, record non-exempt employees’ eligible pay by the week it was earned.

   • For non-exempt employees with multiple jobs, the regular rate is based on a week-by-week weighted average formula across both jobs.

4. When you pay an overtime-eligible bonus or missed wages, apply the payment to the correct pay period. This helps us calculate overtime and regular pay correctly.

You’ll be able to record hours and earnings in payroll by week when it’s required to pay overtime accurately—that’s whenever a non-exempt employee works overtime and is getting an included pay type.

We recommend that you accurately allocate hours and earnings to stay compliant with labor laws. If you choose not to, what you enter will be evenly distributed across all weeks in the pay period, which could result in inaccurate pay and costly fines.

Note: If hours were synced from Gusto Time tracking, they'll automatically be recorded in the appropriate week.

Certain earning types in payroll are automatically defaulted to being included or excluded by Gusto in accordance with the Department of Labor (DOL). 

• If you’re creating a custom earning, you’ll have the ability to select whether that earning should be included or excluded from overtime pay.

• New earnings created and saved after the 30 days cannot be recategorized. If needed, they can be deactivated and new ones created.

When you add included earnings—such as non-discretionary bonuses, commissions, or other qualifying pay—after the original payroll has run, we recalculate the employee’s Regular Rate of Pay (RRP) for that earlier workweek.

If the updated RRP changes how much overtime the employee earned, we create an RRP adjustment in your new payroll. These adjustments help make sure overtime pay stays fair, accurate, and compliant with federal rules.

How we show you an RRP adjustment

Before you submit the off-cycle payroll, we clearly display:

• Which employees need an adjustment

• The adjustment amount

We also prompt you to:

• Review the employee’s earning statement for a detailed breakdown

• Attribute earnings by workweek, when needed, to keep calculations accurate

You will see RRP adjustments in:

• Pay stubs: A clear breakdown of the adjustment and a labeled section for federally qualified earnings

• Payroll review/summary: Notifications that appear when new inputs change a past workweek’s overtime

• Reports: The Payroll Journal and Employee Hours reports include RRP adjustments and qualified earnings.

Why we create RRP adjustments

RRP must reflect all included earnings for the specific workweek they belong to. When you add qualifying earnings to a past period:

• The employee’s total included earnings increase

• Their Regular Rate of Pay increases

• Their overtime premium for that week changes

• We add the difference to the new payroll as an adjustment

Most adjustments are small—often under $5—but they matter for compliance.

If you need help checking which earning types count toward overtime, review our Included vs. Excluded Earnings guidance.

Example: What an RRP adjustment looks like

• Employee: Amy (non-exempt)

• Hourly rate: $10

• Hours worked in the week: 43 (3 hours of overtime)

Payroll 1: Original pay

• Regular wages: 40 hrs × $10 = $400

• Overtime wages: 3 hrs × ($10 × 1.5) = $45

• Total paid: $445

Payroll 2: Retroactive bonus

Two weeks later, Amy’s employer adds a $100 non-discretionary bonus for that same week. Because this is an included earning, we recalculate her RRP.

Step 1: Total included earnings

• (43 hrs × $10) + $100 = $530

Step 2: New RRP

• $530 ÷ 43 hrs = $12.33

Step 3: Updated overtime premium

• New premium owed: $12.33 × 0.5 × 3 hrs = $18.49

• Premium already paid: $15.00

• Adjustment owed: $3.49

Adjustment hourly rate: $3.49 ÷ 3 hrs = $1.16

We add this adjustment as a separate earning line in the off-cycle payroll so Amy receives the amount she is owed.

FAQ

Q: Does this work for semi-monthly pay schedules?

A: Yes. Semi-monthly payroll often spans several workweeks, which can create more frequent adjustments. We now support RRP adjustments for semi-monthly schedules so overtime stays tied to the correct workweek.