How should we pay for fluctuating workweek?

Q. Our employees work irregular schedules. They may work for two weeks and then be off for three. Can we pay them every two weeks based on their average yearly income and, if they work more, pay them at an hourly rate?

A. Yes, as long as nonexempt employees are paid overtime for all hours worked in excess of 40 hours per week. Employers are permitted to pay employees using the fluctuating workweek method.

When using this method, there must be a clear, mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, as long as the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate.

Even if an employer uses the fluctuating workweek method, nonexempt employees must be paid overtime. Under the fluctuating workweek method, payment for overtime hours is one-half times the regular rate, instead of one and one-half times the rate, because the straight-time rate is understood to compensate employees for all hours actually worked.

The regular rate of pay will vary from week to week and is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain the applicable hourly rate for the week.

Overtime Issues D