If you own a wellness clinic or a floral studio, your team's hours probably don't hold still. Your lead designer works 35 hours in January and 55 the week before Valentine's Day. Your clinic's front desk manager covers a vacation, then has a slow stretch. You want predictable payroll, and you don't want to overpay overtime.

Many founders try to solve this with a flat per-client, per-class or per-event rate. That usually backfires, and we explain why in Paying Employees a Per Client or Project Rate Doesn't Get You Out of Overtime.

There's a better tool built for exactly this situation: the fluctuating workweek method under 29 C.F.R. § 778.114. Done right, it gives your non-exempt employees a steady paycheck, keeps you compliant with the Fair Labor Standards Act (FLSA), and pays overtime at half-time instead of time and a half.

How it works

The employee gets a fixed weekly salary that covers every hour worked that week, whether that's 30 or 55. They're still non-exempt, so you still owe overtime past 40 hours. The difference is in the math.

Each week, divide the salary by the hours actually worked to get the regular rate. Because the salary already paid straight time for every hour, you only owe the extra half of that rate for each overtime hour.

Here's a lead floral designer working 55 hours during wedding season, paid two different ways:

The more hours worked in a week, the lower the regular rate, and the lower the overtime premium per hour. The trade-off: in a short week, you still pay the full $1,200.

The requirements

The fluctuating workweek only works if you meet every condition in the regulation:

1. Hours actually fluctuate. The employee's schedule genuinely varies from week to week.
2. Fixed salary, every week. The same amount is paid whether they work 25 hours or 55. No docking for slow weeks or days not worked.
3. Minimum wage, even in the longest week. The salary divided by hours worked can't drop below minimum wage in any week.
4. A clear, mutual understanding. You and the employee both understand the salary covers all hours worked, not just 40. Put it in writing and have the employee sign an acknowledgment.
5. Half-time for every overtime hour. Pay an extra half of that week's regular rate for each hour over 40.

You can still pay bonuses, commissions or premiums on top of the salary. Add them into that week's total pay before calculating the regular rate, the same way you would for any non-exempt employee.

Where owners get it wrong

• Calling a per-class or per-client rate a "salary." If pay still drops when someone teaches fewer classes, sees fewer clients or works fewer events, it isn't a fixed salary, and the half-time math isn't available.
• Dividing by 40. The regular rate is the salary divided by all hours actually worked that week, not by 40. Dividing by 40 overstates what you owe, and gets the method wrong on paper.
• Docking for short weeks. Cutting pay when work is slow breaks the fixed-salary requirement and can unwind the arrangement for every week.
• Skipping the paperwork. Without a signed acknowledgment, proving the mutual understanding gets much harder if an employee later disputes it.
• Not tracking hours. These employees are non-exempt. You still need accurate time records to calculate overtime every week.

Set it up right the first time

A fluctuating workweek can give you predictable payroll and a lower overtime cost, but only if it's structured and documented correctly. We help founders decide whether it fits their team, draft the employee acknowledgment, and set up a payroll process that holds up.

Business Law Group advises growth-stage companies across Louisiana on wage-and-hour compliance and pay structures. Schedule a consultation to get started.