For the firsttime in 50 years, the DOL has put in place a new definition of“regular rate of pay,” (RROP) which determines how an employee'sovertime pay is calculated.

Last week, the Department of Labor published a new rule regarding overtime pay that it says willencourage employers to offer employees more perks.

For the first time in 50 years, the DOL has put in place a newdefinition of “regular rate of pay,” (RROP) which determines how anemployee's overtime pay is calculated. Workers who areeligible for overtime are required to be paid 1.5 times the RROPwhen they work more than 40 hours per week.

Where it gets complicated is that the RROP does not simply referto a worker's base hourly wage. It can also include bonuses, shift differential wages or otherincentive payments. An employee's overtime pay is thereforesupposed to take all of those additional forms of compensation intoaccount.

Related: How does performance pay affect workers' mentalhealth?

The new DOL rule specifies that the following are excluded fromRROP calculation:

• The cost of providing wellness programs, onsite specialisttreatment, gym access and fitness classes, and employee discountson retail goods and services;
• Payments for unused paid leave, including paid sick leave;
• Reimbursed expenses, even if not incurred “solely” for theemployer's benefit;
• Reimbursed travel expenses that do not exceed the maximumtravel reimbursement under the Federal Travel Regulation System andthat satisfy other regulatory requirements;
• Discretionary bonuses, by providing additional examples andclarifying that the label given a bonus does not determine whetherit is discretionary;
• Benefit plans, including accident, unemployment, and legalservices; and
• Tuition programs, such as reimbursement programs or repaymentof educational debt.

The Trump administration argues that employers have beenreluctant to offer some of these benefits for fear that it willcomplicate or drive up the cost of paying overtime wages. The newpolicy will encourage more employers to provide perks.

“The regular rate proposal would provide clarity for employersto allow them to add more benefits to their employees withoutunknown overtime consequences or litigation,” said KeithSonderling, Acting Administrator for the Department's Wage and HourDivision. “This proposed rule offers a positive path forward toemployers and employees alike.”

In early March, the administration proposed another significantovertime rule, updating the salary threshold at which employees canbe exempt from mandatory overtime pay. Under the proposal, thethreshold increased from $23,660 to $35,308. While that is asignificant increase that will increase make 1 million additionalemployees eligible for overtime, it is significantly less ambitiousthan the $47,000 threshold proposed by the Obama administration in2016.

Read more: 

• Employers don't need to compensate for time spenton wellness activities, DOL says
• New overtime salary threshold proposal would cover1.3 million more workers
• 5 wage and hour compliance issues that could costemployers