Ask the Experts: How to Calculate Minimum Wage
Question:
Is minimum wage calculated on hours worked or hours worked plus performance-based earnings, thus subject to change each pay period? For instance, a nonexempt employee is paid $320 for 40 hours worked with $60 added for performance goals, totaling $380. Which amount is used to determine the employee’s minimum wage; $320 or $380? The minimum wage in our state is $8.50.
Answer:
The amount used to determine the employee’s minimum wage, assuming the employee met their performance goals, would be $380 because, under the federal Fair Labor Standards Act (FLSA), which requires that employers must pay nonexempt employees at least the applicable minimum wage for all hours worked up to 40 in the work week, the calculation of the minimum wage will include any commissions or bonus/incentive pay actual paid for that period.
However, as a practical matter, if the base rate of pay, as here, is insufficient to independently meet the minimum wage standard, thought should be given to increasing the rate of pay immediately. In this situation, if the employee did not meet their performance goal, the minimum wage requirement would not have been met.
