Some salaried employees are not exempt from overtime, and their employers may use a special formula called the fluctuating workweek method. It can produce much smaller overtime premiums than time and a half. This guide explains when it applies, how it is calculated and what to check on your pay.
What the fluctuating workweek method is
Most people assume that a salaried, non-exempt employee earns 1.5 times a rate found by dividing salary by 40. There is a lawful alternative, described in the Department of Labor's regulation at 29 CFR 778.114, called the fluctuating workweek (FWW) method. Under it, the fixed weekly salary is treated as pay for all hours worked in the week, whether few or many. The regular rate is found by dividing the salary by the total hours worked that week, and the employer owes only an additional half of that regular rate for each hour over 40, because straight time for every hour has already been paid through the salary. Because the regular rate falls as hours rise, the overtime premium is smaller than under the standard time-and-a-half method.
When it can be used
The method is available only if all of these conditions are met, as described in 29 CFR 778.114.
- The employee is non-exempt, so overtime is owed.
- The employee's hours actually fluctuate from week to week; a stable 50-hour schedule does not fit the method.
- The employee receives a fixed salary that does not vary with the number of hours worked in the week, whether few or many.
- The salary is large enough that, divided by the hours worked in the week, it never falls below the minimum wage.
- The employer and employee have a clear mutual understanding that the fixed salary is straight-time pay for all hours worked in the week, whatever their number.
- The employer pays the overtime premium of at least one-half of the regular rate for all hours over 40.
If any condition fails, the method is not valid, and the employee's overtime is calculated the standard way. In particular, an employer that docks the salary for short weeks, for partial-day absences or for hours not worked may undercut the fixed salary condition. The regulation also now confirms that bonuses and premium payments can be paid to an employee on the fluctuating workweek method, as long as they are included in the regular rate calculation.
The formula
- Regular rate = weekly salary ÷ total hours worked in the week.
- Overtime premium = 0.5 × regular rate × hours over 40.
- Total pay for the week = weekly salary + overtime premium.
Note that the calculation uses the actual hours of each workweek, so the regular rate changes every week. A week of 40 hours or fewer has no overtime premium, and the full fixed salary is still paid.
Pay on a $1,000 weekly salary under the fluctuating workweek method
| Hours worked | Regular rate (salary ÷ hours) | Overtime hours | Overtime premium (½ × rate × OT hours) | Total pay |
|---|---|---|---|---|
| 35 | $28.57 | 0 | $0.00 | $1,000.00 |
| 40 | $25.00 | 0 | $0.00 | $1,000.00 |
| 45 | $22.22 | 5 | $55.56 | $1,055.56 |
| 50 | $20.00 | 10 | $100.00 | $1,100.00 |
| 55 | $18.18 | 15 | $136.36 | $1,136.36 |
| 60 | $16.67 | 20 | $166.67 | $1,166.67 |
Comparison with the standard method
Suppose the same employee is instead treated as paid a $1,000 salary for a 40-hour week, so the regular rate is $1,000 ÷ 40 = $25.00. For 50 hours, overtime would be 10 × 1.5 × $25.00 = $375.00 on top of the salary, for a total of $1,375.00. The fluctuating workweek method gives $1,100.00 for the same week. The difference of $275.00 explains why this is one of the most heavily scrutinized pay practices. It is lawful only when the conditions are met, and the clear mutual understanding is the one most often disputed. The standard method applies when the salary is understood to cover a fixed number of hours, such as 40 or 45, rather than all hours worked.
The minimum wage check
The salary divided by hours worked must always be at least the applicable minimum wage. Take a $400 weekly salary and a 60-hour week. The regular rate is $400 ÷ 60 = $6.67, which is below the federal minimum wage of $7.25, so the employer owes more. The employer must pay at least $7.25 for each hour, or 60 × $7.25 = $435.00, plus the half-time premium. Since state minimum wages are often higher than the federal one, the check must use whichever applies. With a $1,000 salary, the lowest rate in the table above is $16.67 at 60 hours, well above minimum wage.
How to tell whether you are being paid this way
- Your offer letter or pay policy may say your salary covers "all hours worked" in a week. That language is a typical sign of the method.
- On a pay stub, the overtime line is usually a small premium, often labeled "half-time" or "OT premium," rather than a full 1.5 times rate for each overtime hour. See how to read a pay stub.
- Your regular rate changes from week to week, while your base salary stays flat.
- Your hours vary a lot, such as 32 in one week and 55 in another.
State law
The federal regulation sets the baseline, but states can be stricter. California does not permit the fluctuating workweek method for overtime, and other states place conditions on it or require the standard calculation. Where state law is stricter than the FLSA, the employer must follow the state rule. Check your state labor department's website before assuming the method is allowed.
If you are salaried, are you exempt?
A salary alone does not make someone exempt from overtime. To be exempt, the employee must meet both the salary and the duties requirements for an overtime exemption. An employee who does not qualify is non-exempt, and the fluctuating workweek method is one of several ways the employer may lawfully compute overtime. See exempt vs. non-exempt employees for the tests. If your employer calls you exempt but you do routine, non-managerial work, you may be misclassified and entitled to standard overtime.
Tracking your hours
Under this method, accurate hours matter even more, because the regular rate and the overtime premium both depend on them. Keep your own daily record of start time, end time and unpaid breaks, and use the Weekly Time Card Calculator to total each week. To compare with the hourly method, enter your salary-based hourly figure in the Overtime Pay Calculator. For the regular-rate basics, read how to calculate overtime pay, and see bonuses and overtime if you also receive a nondiscretionary bonus.
Frequently Asked Questions
What is the fluctuating workweek method?
A way to calculate overtime for non-exempt salaried employees whose hours vary. The salary is treated as pay for all hours worked, the regular rate is salary divided by hours worked, and overtime is an additional half of that rate for hours over 40.
How do I calculate overtime on a fluctuating workweek?
Divide the weekly salary by total hours to get the regular rate, then multiply 0.5 times the regular rate times overtime hours. Add the result to the salary.
Is the fluctuating workweek method legal?
Federally, yes, if all conditions in 29 CFR 778.114 are met, including a fixed salary, fluctuating hours and a clear mutual understanding. Some states, such as California, do not allow it.
Why is the overtime premium only half time?
Because the fixed salary already pays straight time for every hour worked, the employer only owes the extra half for overtime hours.
Can my employer dock my salary for missing hours under this method?
Deductions for hours not worked can conflict with the fixed salary requirement and may make the method invalid. Ask your state labor agency about your situation.
Can I get a bonus on the fluctuating workweek?
Yes, but bonuses and premium payments must be included in the regular rate calculation for the week.
Related tools & guides
This guide is for general informational purposes only and is not legal, tax, or financial advice. Labor laws vary by state and change over time. Confirm your specific situation with your employer, HR department, or the U.S. Department of Labor.