J. Regular Rate Includes Certain Non-Cash Payments

Under section 203(m) of the Act and part 531 of the regulations, an employer may pay part of the wages in forms other than cash. For example, the wages of a food service employee may include the reasonable cost of meals furnished by the employer in connection with the job. An apartment complex employee may be furnished an apartment and utilities in addition to an hourly wage or salary. In such cases, the employer is allowed to count the reasonable cost of the meals, lodging, or other facilities toward the minimum wage and overtime pay that would normally be payable. 29 C.F.R. 778.116 makes clear that if the compensation includes such non-cash payments (also called "wages in kind"), the reasonable cost of the non-cash items must be included in the employee's regular rate for overtime purposes. The employee's straight-time hourly earnings or salary would be added to the reasonable cost of the non-cash payments, and that total would be divided by the number of hours worked for the workweek in order to calculate the regular rate. The rules for determining "reasonable cost" are found in part 531 of the regulations.

Keep in mind that under section 61.016(b) of the Texas Payday Law, if part of an employee's wages involves "wages in kind", the employer must have written authorization from the employee in order to pay wages in that manner.

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