Don't HR Alone #55 - QA's: Minimum Wage, Service Dogs, and Cyber Security
Is minimum wage calculated on hours worked or hours worked plus performance-based earnings, thus subject to change each pay period? For instance, a nonexempt employee is paid $320 for 40 hours worked with $60 added for performance goals, totaling $380. Which amount is used to determine the employee's minimum wage; $320 or $380? The minimum wage in our state is $8.50.
The amount used to determine the employee’s minimum wage would be $320 because, under the federal Fair Labor Standards Act (FLSA), employers must pay nonexempt employees at least the applicable minimum wage for all hours worked up to 40 in the work week and the calculation of the minimum wage cannot include commissions or bonus/incentive pay. Certain credits may be permissible that would allow the rate of pay to fall below the minimum wage, but those credits are limited to tip credits and credits for food and lodging.
Therefore, in your example, if your employee is earning $320 per week for 40 hours of work, the rate of pay is $8 per hour. In your state, your minimum wage is $8.50 per hour. You would need to increase the rate of pay for hours worked by $.50 per hour so that the employee earns the effective rate of pay. The incentive payment will be in addition to the applicable minimum wage.
While employers must include commissions and nondiscretionary bonus payments in the calculation of overtime, commissions and any bonus or incentive payments are not included in the calculation of minimum wage.