If you pay your nonexempt employees on an hourly rate basis, their "regular rate" is the amount of the hourly wage you've agreed to pay them. We recommend that you pay all nonexempt workers at an hourly rate.

If you don't take our advice and insist on paying them at a piece rate, weekly rate, or some other basis, you'll still need to determine their regular hourly rate of pay for purposes of determining whether you're following the minimum wage and overtime pay laws.

Determining the regular rate is not always as easy as dividing weekly earnings by weekly hours worked. Why? Because some types of pay shouldn't be counted toward weekly earnings.

That's both good news and bad news for you. The bad news is that reducing the weekly earnings will drive the hourly rate down, thus potentially making it more difficult to meet the minimum wage requirements. On the other hand, reducing the hours worked will possibly reduce the overtime you have to pay.

For better or worse, there isn't much you can do about it. Federal wage and hour law requires you to omit the following items from calculations of an employee's regular rate:

• gifts, including Christmas bonuses
• idle-time payments, as for holidays and absences
• reimbursements for expenses
• payments similar to idle-time payments and reimbursement for expenses
• discretionary bonuses
• profit-sharing and savings-plan payments by employers
• welfare-plan contributions by employers
• premium pay of any amount for hours worked in excess of eight in a day or in excess of the statutory straight-time workweek
• premium pay of any amount for hours worked in excess of normal or regular daily or weekly standards
• premium pay resulting from time and one-half rates paid for outside of a contractual daily period not exceeding eight hours or outside of a contractual weekly period not exceeding the statutory straight-time workweek

So, in the process of determining what amount of pay you're going to divide the employees number of hours worked into, be sure to exclude any of the payments above.