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Fluctuating Workweek Overtime

Fluctuating workweek (FWW) overtime pay is one way to comply with overtime requirements when an employee’s time fluctuates from week to week. Employers whose employees work a lot of hours part of the year and very little hours a week another part of the year typically employ it. Obviously, golf courses are an ideal candidate to use this strategy.

Fluctuating workweek overtime is legal as long as the following conditions are met:

  • The employee must be on a guaranteed weekly salary which is paid to the employee, as long as the employee performs any work in the work week. No pay is required for a workweek in which the employee is out for the entire workweek and performs no work in that workweek. Pay periods can still be bi-weekly, semi-monthly, or monthly; but the work hours have to be computed weekly to determine the hours worked each workweek. For this reason, it’s suggested that pay periods be either weekly or bi-weekly when an employee is on a fluctuating workweek overtime pay schedule, so the pay periods will correspond with each workweek.

  • The hours of the employee must fluctuate from workweek to workweek. However, there are no rules as to how much or how little the hours must fluctuate from workweek to workweek.

  • The regular hourly rate of pay which is used to base the half time overtime rate must be at least the minimum wage of the state in which the business resides.

Here's how it works: Let's say an employee's guaranteed salary is $400 a week and the employee works 50 hours one workweek. The employer divides the $400 guaranteed weekly salary by 50 hours to get the regular hourly rate of pay for that workweek, which computes out to be $8 an hour. In this example, the employee actually earned $8 an hour straight time rate for all the hours including the hours worked in excess of 40. Now the employer owes the employee the half time rate for the hours worked in excess of 40. In this example, it is for 10 hours. Please note that the overtime rate is a "time and a half rate," and the employee in this example has already received the "time rate" and is now due the "half rate" for the overtime hours worked in excess of 40. To do this, the employer is to divide the $8 rate in half, which computes to $4 an hour for the "half rate," which is then multiplied by the 10 overtime hours. That comes to $40 ($4 an hour times 10 hours equals $40). The employee is due an additional $40 gross for the 10 hours overtime worked in the workweek. In this example, the employee is due a total gross pay of $440 for all of the hours worked in the workweek for both the straight time hours and the overtime hours ($400 plus $40 equals $440). The more hours worked in a workweek, the less the regular hourly rate of pay will be. The regular rate can go all the way down to the minimum wage, but that’s it. Therefore, using the example of a guaranteed salary of $400 a week, the most the employee could work in a workweek under the fluctuating workweek overtime method for this example is 55 hours ($400 divided by $7.25 an hour equals 55.17 hours). The overtime half time pay cannot be a part of the $400 salary that’s for the total straight time pay for all of the hours including the "straight time" pay for the hours over 40. The employee is still getting time and a half pay for the hours worked in excess of 40 in a workweek. Overtime hours are based on each individual workweek—each workweek stands on its own—and not by pay period or by month or by any other period of time. Therefore, an employer cannot base the overtime hours on the total hours worked in a bi-weekly or a semi-monthly pay period. To determine the number of overtime hours and for the calculation of overtime hours, each workweek stands on its own.

Five Basic Requirements for FWW Implementation

  • The employee must receive a guaranteed salary for each work week regardless of how many hours they work, and it must comply with minimum wage requirements as calculated on a 40-hour work week. Federal regulations require the salary be large enough that it never results in a regular rate of pay below minimum wage taking into account all hours worked.

  • The employer must get consent from the employee that they understand the utilization of the FWW calculation. Note, while the U.S. Labor Department does not require the agreement to be in writing, employers should have some proof of mutual agreement.

  • The employee’s work week must actually fluctuate in the number of hours worked to utilize the FWW. Employers may not put all employees on a FWW to avoid paying what may be higher overtime wages. While federal regulations don’t specify how much a work schedule must fluctuate, the courts and the DOL suggest there needs to be fluctuation that’s probably beyond what most employees experience. A few hours of fluctuation may not be enough. A good acceptable example might be a ski resort employee who works 55 hours a week during the winter but 30 during the summer.

  • The employee must receive 0.5 times regular rate of pay of at least minimum wage for each hour worked in a work week over 40.

  • Under the federal regulations, an employee receiving pay under FWW calculation cannot receive other forms of compensation, such as bonuses, commissions or holiday pay, as part of the fixed salary or above the fixed salary. Those additional forms of compensation are evidence that the employee’s pay is not fixed.

As you can see, while the FWW may sound like a viable option, it does have to be carefully analyzed to ensure it complies with the FLSA. If utilized, it must be carefully managed.


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