What is a fluctuating workweek?

Fluctuating workweek definition and meaning

The fluctuating workweek is a payment method created by the Fair Labor Standards Act, employers may use to pay non-exempt workers a set weekly salary, no matter how many hours they work. Note that this method is only applicable to employees whose hours change on a weekly basis. Per the fluctuating workweek method, non-exempt workers are also entitled to overtime pay when they work over 40 hours in a single workweek. If a non-exempt employee works 35 hours one week and 40 hours the next, for example, they will earn the same weekly salary.

How does the fluctuating workweek work?

If you decide to follow the fluctuating workweek method, you’ll need to use this formula to calculate total pay:

(Hourly rate/ 2) × overtime hours + weekly salary + bonuses, commissions, hazard pay, and premium payments if they exist

Here’s an overview of the steps involved in this calculation:

• Determine the hourly rate of pay for a given week.
• Divide the hourly rate of pay in half.
• Multiply the halved hourly rate by the amount of overtime hours worked.
• Add that figure to the weekly salary and include bonuses or other incentive compensation.

Let’s say an employee earns $500 per week, works 50 hours (10 hours of overtime) in a week, and earns a $150 bonus for that week. In this scenario, their weekly pay would be $665.

$500 weekly salary + $150 bonus / 50 hours) = $13 hourly rate

($13 hourly rate ÷ 2) × 10 overtime hours + $500 weekly salary + $100 bonus = $665

When does the fluctuating workweek apply?

In order for the fluctuating workweek to kick in, the following must be applicable:

• Both the employer and employee have a clear, mutual understanding that the employee will be paid on a salary basis but their overtime pay rate will vary based on the number of hours they work in a single week.
• The employee’s salary is high enough that their regular pay rate will never drop below the minimum wage threshold.
• The number of hours an employee works in a single week fluctuates, meaning it exceeds or dips below 40 hours.

It’s important to note that if an employee works 40 or more hours per week on a regular basis and rarely works less than 40 hours, the fluctuating workweek method can’t apply as evidence of fluctuation is required.

Fluctuating workweeks and state laws

Every state has their own view on fluctuating workweeks. In some states, such as Alaska, California, and Pennsylvania, fluctuating workweek overtime is either restricted or prohibited. Connecticut, for example, imposes restrictions on fluctuating workweeks for commercial employees, such as those who work in retail. Before moving forward with the fluctuating workweek method, ensure it’s legal based on federal, state, and legal laws.

What is the fluctuating workweek method in Florida?

Florida allows salaried employees to earn an overtime premium of one-half times their regular hourly pay rate. An employee with a set salary and fluctuating work week may qualify for this overtime benefit.

What is the difference between the fluctuating workweek compensation method and a belo contract?

Per the fluctuating workweek method, the employee and employer must have a mutual understanding of compensation and a written contract is not required. Under a belo plan, however, the employee must “agree” or “accept” the compensation method. In many cases, the belo plan involves a written agreement, often in the form of a bona fide contract.

Pros and cons of the fluctuating workweek

Just like any compensation method, the fluctuating workweek comes with pros and cons for employers and employees. The most noteworthy benefits include predictable income, flexible scheduling, and lower overtime expenses. This method may also help employees who rely on a minimum weekly pay amount, regardless of how few days or hours they work in a given week.

The downside of the fluctuating workweek relates to an employee’s earning capacity. If they work more hours in a given week, they’ll have to settle for a lower pay rate. As a result, some employees might be less motivated to work overtime. The fluctuating workweek method also poses a greater risk of costly disputes that may warrant legal representation.