DOL’s new ‘regular rate of pay’ rule: How it impacts benefits in 2020
Do you know how to correctly calculate your employees’ regular rate of pay (RROP)? There’s been some confusion among employers, which is why the feds switched up the way firms calculate RROP.
Employers might want to pump up their wellness programs now that the DOL has finalized its RROP rule, which became effective Jan. 15, 2020.
Finally, employers have clarification about which benefits may be excluded when calculating an employee’s RROP. The final rule, which is the DOL’s first adjustment to the “regular rate” rule in 50 years, updated the FLSA definition of RROP to reflect present-day perks and benefits.
To determine a nonexempt worker’s RROP, which is used to calculate their overtime rate, an employer must take into account a worker’s total compensation for each workweek, including bonuses or incentives.
Under the FLSA, courts have struggled to interpret the meaning of the “regular rate” and the correct amount of overtime owed to employees. That’s why some employers have chosen not to offer competitive benefits, or risk a lawsuit.
But the new rule spells out for employers which benefits they can now exclude when determining an employee’s RROP.
Excluded benefits
The complete list of excluded benefits includes:
- cost of certain parking benefits, wellness programs, gym access, certain tuition benefits (including student loan programs) and adoption assistance
- payments for unused paid leave, including paid sick leave or PTO
- reimbursed expenses, including cellphone plans, credentialing exam fees and organization membership dues, and
- certain sign-on bonuses and longevity bonuses, as well as discretionary bonuses.
The new RROP rule should “encourage employers to provide additional and more creative benefits without fear of costly litigation,” according to the DOL.
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