When an employee is paid a fixed salary each week, but their hours also change from week to week, the employer may use a calculation for overtime that is referred to as “fixed salary for fluctuating workweeks.” This method is also called “Chinese overtime.”
Computing overtime using this method is certainly beneficial to the employer, it is important to keep in mind that there are also certain requirements that must be met. In order for the employer to be able to apply the Chinese overtime rule when they are calculating overtime, the employee has to have a work schedule with fluctuating hours. The employee must also be paid a straight salary for all hours worked in a work week. He employer also cannot make any deductions from their salary if they work less than 40 hours in a week. The employee also be paid a rate that is never below the Federal minimum wage.
In calculating overtime, the regular rate is determined by dividing the fixed salary by the number of hours that they worked during the week. Since they are already paid straight time for the hours, overtime is then paid at half time.