Is the Fluctuating Workweek Model Right for your Workplace? Recent FLSA Rule Changes Have Made It Easier

What It Is

The fluctuating workweek method is a method of payment that employers can use to pay non-exempt employees a set weekly salary, regardless of the number of hours worked. It can only be used for employees whose hours actually change from week to week. Under the fluctuating workweek method, non-exempt employees receive a set weekly salary no matter how many hours they work, plus additional overtime pay when they work more than 40 hours in one workweek.

How It Works

Additional overtime pay under the fluctuating workweek method is based on the employee’s average hourly rate (the employee’s fixed salary and any non-excludable additional pay divided by the number of hours actually worked in a specific workweek). The average hourly rate will change from week to week depending on how many hours the employee actually worked. The employee then receives at least an additional 0.5 times (or additional “half time”) that rate for each hour worked beyond 40 in the workweek. This arrangement must be set out by a written agreement.

Why It’s Easier Now

Previously, employers generally could not use the fluctuating workweek method for an employee who received bonuses and other incentive-based pay, such as commissions. Recent FLSA regulations now allow employers to pay bonuses or other incentive-based pay above and beyond workers’ fixed salaries when using the fluctuating workweek method, as long as those payments are included in the calculation of the regular rate. The DOL provides a sample calculation here.

LP’s labor and employment group can help advise further on whether the fluctuating workweek method is right for your employees and put together the appropriate agreements.