What must be included in wage calculations under federal law for overtime pay?

The correct answer is that bonuses defined under an employment agreement must be included in wage calculations under federal law for overtime pay. Under the Fair Labor Standards Act (FLSA), the calculation of overtime pay is based on the employee’s regular rate of pay, which includes not only their hourly wage but also any bonuses that meet certain criteria. If a bonus is part of the employee’s regular compensation and is defined in their employment agreement, it must be factored into the regular rate when calculating overtime. This ensures that the employee receives appropriate compensation for hours worked beyond the standard 40 hours in a week.

Regular work hours and overtime hours alone do not encompass all aspects of wages for overtime calculations, as they focus solely on the hours worked rather than the financial components of compensation. Fringe benefits, while valuable to employees, are typically not included in the calculation of the regular rate since they do not constitute direct cash payments for hours worked. This thorough understanding of what constitutes the total compensation for an employee is crucial for proper compliance with federal regulations regarding overtime pay.