The Payroll module supports FLSA flat sum overtime adjustments regulations for California. These regulations have the following differences from the standard FLSA calculation:
- The number of weekly hours worked that is used to calculate the increase in the employee's regular rate is capped at 40 and shouldn’t include overtime or premium earnings. Conversely, there is no cap for the standard FLSA calculation. The purpose of the 40-hour cap is to prevent the increase in regular rate that is used to calculate the overtime adjustment from being impacted by the number of overtime hours an employee works. If overtime hours are included as part of total work hours in the FLSA calculation, the application pays out a smaller FLSA adjustment amount than if only 40 regular hours are considered total work hours.
- The flat sum bonus is always paid at 1.5 times the employee's regular rate.
You can handle FLSA flat sum overtime adjustments for California employees by adding the Payroll FLSA CA Flat Sum Overtime Adjustment Rule to the employee’s payroll policy in Payroll Setup > Payroll Policies. You should use this rule instead of the Payroll FLSA Overtime Adjustment Rule to generate flat sum FLSA overtime adjustments for California employees.
The Payroll FLSA CA Flat Sum Overtime Adjustment Rule has similar functionality as the Payroll FLSA Overtime Adjustment Rule, which is the standard rule for calculating these adjustments. However, the following parameters are excluded to support the California requirements:
| Excluded Parameter | Reason for Exclusion |
|---|---|
| Overtime rate multiplier | The multiplier is hard-coded at 1.5. However, the rule still includes the Double overtime rate multiplier parameter, which is set to a multiplier of 2, by default, if you leave it blank. |
| Enable Work Week Proration | The rule performs workweek proration, by default. |
| Respect Business Date for Earnings in Current Pay Period | The rule respects business date in current and committed pay periods, by default. |
| Include Premium Earnings Hours | Premium earnings shouldn’t be configured as part of total work hours worked used in the calculation to determine the increase in regular hourly rate. |
In the Eligible FLSA adjustable earnings setting of this rule, earnings are only available to select if both the FLSA Adjustable and FLSA California Flat Sum Bonus checkboxes are selected in the General sub-tab of the Earnings tab in Payroll Setup > Earnings and Deductions. The FLSA California Flat Sum Bonus checkbox appears only after you select the FLSA Adjustable checkbox.
Selecting the FLSA California Flat Sum Bonus checkbox makes the earning unavailable in the Payroll FLSA Overtime Adjustment Rule and also clears it from existing instances of that rule. When you select this checkbox, this setting prevents both rules from paying out an adjustment for the same bonus or lump sum earning.
The rule is triggered to run when you add or import an eligible bonus or lump sum earning entry for the employee in the Quick Entry or Checks tab of Payroll. In the details of this entry, you must define the FLSA Adjust Start Date and FLSA Adjust End Date fields to set which hours the application includes in the calculation.
As part of the calculation, the rule looks at the employee's total work hours and overtime hours over the FLSA date range that you defined. In the rule parameters, you can customize which hours are considered work hours and overtime hours.
To support the California requirements, the 40-hour cap applies to hours for earnings that are defined by the following parameters of the rule:
- Work earnings eligible
- Work earning groups eligible
- Work earnings ineligible
- Work earning groups ineligible
This means that, regardless of the earnings that you define as work earnings or the number of hours worked, the employee's hours worked for the purpose of FLSA calculation cannot go over 40. For example, say you leave all of the above settings undefined so that all earnings are eligible work earnings. If an employee works 40 regular hours and 10 overtime hours this week, the rule still only considers 40 of those hours as work hours for the purpose of the FLSA calculation.
The calculation only includes earnings that have associated hours and rate data. Hours and rate can be sourced from WFM or external time data that is mapped to earning codes in Payroll, or earning entries added directly in Payroll (for example, quick entries). The application can’t use payroll election earnings or other generated earnings in the calculation, because these do not have associated rate or hours.
When the rule runs, it calculates the FLSA overtime adjustment on a week-by-week basis, as follows:
- The rule divides the total bonus or lump sum amount by the number of weeks in the FLSA period. If the start or end date of the FLSA period falls mid-week, this week is still counted, as shown in Example 1. The number of weeks also depends on the Start of Week setting that is defined for the employee's pay group in the Pay Group Properties tab in Pay Setup > Pay Group.
- After the rule determines the weekly bonus amount, it calculates the overtime adjustment for each week that has overtime. Because the rule respects the business date, it only pays out an adjustment for overtime hours that fall within the FLSA period. However, if the start or end date of the FLSA period falls mid-week and this week has overtime, the application still uses all of the work hours of the week within the 40-hour cap to calculate the increase in regular rate. This scenario is illustrated in Example 2.
When the rule runs, the application pays out the overtime adjustment by using the earning code that you specify in the Overtime adjustment earning setting of the rule parameters. You can review the adjustment in the employee earning statement and the Preview tab of Payroll.
You can also use the FLSA CA Flat Sum Overtime Adjustment Rule to calculate overtime earnings as a separate premium, rather than a blended rate, using the Reduce Worked Hours By Overtime Premiums checkbox. When you select this checkbox, the rule adds the hours from the eligible overtime earnings and the hours from eligible double time earnings and subtracts this sum from the eligible work earnings. The rule still enforces the cap of 40 worked hours per week.
The following two examples illustrate the calculation process for the Payroll FLSA CA Flat Sum Overtime Adjustment Rule.
Example 1:
The employee is in a weekly pay group with a start of week on Sunday. The current pay period runs from August 26 to September 1. In it, you add a $750 bonus entry with an FLSA period of August 1 to August 31, 2018.
While the first week of August starts on Sunday, July 29, the rule still counts this week when calculating the weekly bonus amount, as shown in the following example:
As a result, the rule calculates a weekly bonus amount of $150 ($750 divided by the five weeks of August).
If the employee worked 10 hours of overtime in the week of August 12, and another 10 hours in the week of August 19, the application generates an adjustment of $112.50 ($56.25 for each week). The calculation for each week looks as follows:
| Calculation Step | Description |
|---|---|
$150 / capped 40 weekly hours = $3.75
|
(Increase regular weekly rate) |
$3.75 x 1.5 = $5.625
|
(Increase in the overtime premium) |
$5.625 x 10 overtime hours = $56.25
|
(Overtime adjustment amount) |
Example 2:
An employee in a biweekly pay group with a start of week on Sunday has three pay groups in August 2018, as shown in the following example:
The current pay period runs from August 26 to September 8. In it, you add a quick entry for the employee for a $750 bonus with an FLSA period of August 1 to 31.
The employee worked two hours of overtime each day between Monday, July 30 and Friday, August 3, totaling 10 hours. No other overtime is worked in August.
As such, the application only pays out an overtime adjustment for the six hours of overtime worked in August, leading to an adjustment of $33.75. However, the application still looks at all of the eligible hours worked the week of July 29 that are within the 40-hour cap to determine the increase in the employee's regular rate.
The calculation can be broken down into the following steps:
$150 / capped 40 weekly hours = $3.75$3.75 x 1.5 = $5.625$5.625 x 6 overtime hours = $33.75