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L. Annual Salary Paid in Shorter Period

Special Problem: Annual Salary Paid in Shorter Period

If an employee is paid on the basis of a stated annual salary, but the actual work is performed over a shorter period, a special issue arises. This is especially common in the case of school district employees, who are often paid an annual salary for less than a full year's work. DOL's Field Operations Handbook, Section 32b08, contains the following guidance for this situation:

§ 32b08 Annual salary earned in shorter period: regular rate. Certain employment such as that in schools does not normally constitute 12 months of work each year. For the convenience of the employee, the annual salary earned during the duty months is often paid in equal monthly installments throughout the entire year. For purposes of finding the regular rate of pay for OT purposes in such cases, the annual salary is considered in relation to the duty months, rather than in relation to the entire year. Thus, for example, a school bus driver may receive an annual salary of $3000 for 10 months' duty, but be paid 12 equal monthly installments of $250 each. In such a case, he is considered as being paid at the salary rate of $300 per month, or $69.23 per week. The regular rate for OT purposes is found in the usual manner based on this weekly salary. (See FOH 22b11 and 30b18.) [Note: those FOH sections no longer exist. The numbers in the revised FOH are 22h12 and 30b12, respectively. Those two sections of the FOH restate section 32b08 with respect to the salary basis for white-collar exemptions and computation of minimum wage, respectively.]

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