The Fair Labor Standards Act governs the minimum wage and overtime pay requirements of the nation’s workers. Under the FLSA, employers are required to pay employees, who are not otherwise exempt, the federal minimum wage and any overtime pay of one and one-half times the employee’s regular rate of pay.
The regular rate of pay is calculated by adding together all wage payments; noncash wages in the form of goods, board or lodging; and no overtime premium payments, such as night shift differentials. Because of these requirements, nonexempt employee pay is often variable.
The amount paid to a nonexempt employee, even if salaried, is usually subject to adjustment with variations in hours worked. However, where the requirements are met, a nonexempt employee can be paid a fixed salary each workweek even though the hours vary from week to week. Such plans include fluctuating-workweek plans, Belo plans and certain other guaranteed pay plans. However, such plans are subject to strict requirements in order to be compliant.
In establishing a guaranteed pay plan, it is important for the employer to make sure that the employees understand how they are being compensated and where required, agree to the payment plan. Employers must also avoid practices that are considered by the DOL to circumvent the minimum wage and overtime requirements of the FLSA.