29 CFR 548.302 - Average earnings for period other than a workweek.
(a) Section 548.3(b) authorizes as an established basic rate: “A rate per hour which is obtained by averaging the earnings, exclusive of payments described in paragraphs (1) through (7) of section 7(e) of the act, of the employee for all work performed during the workday or any other longer period not exceeding sixteen calendar days for which such average is regularly computed under the agreement or understanding. Such a rate may be used to compute overtime compensation for all the overtime hours worked by the employee during the particular period for which the earnings average is computed.”
(1) The ordinary method of computing overtime under the act is at the employee's regular rate of pay, obtained by averaging his hourly earnings for each workweek. Section 548.3(b) authorizes overtime to be computed on the basis of the employee's average hourly earnings for a period longer or shorter than a workweek. It permits the payment of overtime compensation on the basis of average hourly earnings for a day, a week, two weeks or any period up to 16 calendar days, if the period is established and agreed to with the employee prior to the performance of the work. 9 The agreement or understanding may contemplate that the basic rate will be the average hourly earnings for a day or a specified number of days within the sixteen day limit, or it may provide that the basic rate will be the average hourly earnings for the period required to complete a specified job or jobs.
9 Averaging over periods in excess of 16 calendar days may in appropriate cases be authorized by the Administrator under § 548.4.
10 See § 548.301 (c) for a discussion of the method of computing overtime for an employee paid on a semi-monthly basis.
(2) In this connection it should be noted that although the basic rate is obtained by averaging earnings over a period other than a workweek the number of overtime hours under the act must be determined on a workweek basis.
(c) In computing the basic rate under § 548.3(b), the employer may exclude from the computation the payments which he could exclude in computing the “regular” rate of pay. 11