What is Premium Pay?

Premium pay is an employee’s hourly rate (straight time rate) and nondiscretionary wages such as hiring bonuses, performance bonuses, working holidays, overtime pay, missed rest breaks, or missed lunch breaks.

By: Brad Nakase, Attorney

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In California, premium pay is additional pay owed to an employee that is separate from the regular hourly pay. In California, employers must provide employees rest, meals, and recovery breaks. California employers that fail to provide their employees with uninterrupted rest, meals, or recovery breaks must pay employees premium pay. Premium pay is equal to one additional hour of pay.

In California, premium pay consists of a worker’s hourly rate, or straight time rate, in addition to nondiscretionary wages. These wages include attendance bonuses, incentive bonuses, hiring bonuses, and performance bonuses. Premium pay can therefore alter between pay periods because the worker’s discretionary pay might not always be consistent. Therefore, it is essential that an employee look carefully at their wage statements to make sure that they get their complete (and correct) premium pay for each of their missed break periods.

In this article, our attorney will discuss premium pay for:

1. What does premium pay mean for a job?

2. Rest Period Premium Pay

3. Meal Break Pay Premium

4. Overtime Premium Pay

5. What is straight time vs premium time?

What does premium pay mean for a job?

Under California law, an employer is required to provide rest, meal, and recovery breaks for his or her employees. If an employer does not supply these uninterrupted, code-compliant rest, meal, and recovery breaks, then he or she must give his or her works premium pay, or compensation. This means that if a worker believes they have been denied their rightful break periods in the workplace, they should contact an experienced employment lawyer to recover premium pay.

An employee can get premium pay for any of the following:

Missed rest breaks
Missed meal breaks
Working overtime (8-12 hours)
Working double time (over 12 hours per day or 7 consecutive days)
Missed recovery breaks. Employees working outdoors are entitled to take a recovery break to prevent heat illness by cooling down.
Incentive bonuses (only if company policy allows)
Attendance bonuses (only if company policy allows)
Performance bonuses (only if company policy allows)
Hiring bonuses (only if company policy allows)

Example of Premium Pay for a job. An employee works 10 hours today. 8 of those hours is regular pay. 2 hours is overtime pay which is “premium pay.”

Rest Period Premium Pay

What is a rest period premium pay? Under California Labor Code section 226.7, if an employer does not provide an employee with an uninterrupted rest break, the employer must pay the employee a premium payment of one hour of pay at the employee’s regular hourly rate.

Example for Rest Break Premium Pay. An employee’s hourly rate is $20 per hour. The employee worked four hours and is entitled to a ten-minute break. The employee did not get the rest break. Therefore, the employer owes the employee a premium pay of $20 for the missed rest break. As a result, if the employee worked 5 hours, the employer owes the employee $20 X 5 hours + $20 for missed rest break = $120.

As a result, if a worker is denied a rest break, they may collect an hour of premium pay for that missed break period.

Example for Meal Break Premium Pay. . An employee’s hourly rate is $20 per hour. The employee worked five hours and is entitled to a meal break. The employee did not get the meal break. Therefore, the employer owes the employee a premium pay of $20 for the missed meal break. As a result, if the employee worked 8 hours, the employer owes the employee $20 X 8 hours + $20 for missed rest break = $180.

Employees who work more than 40 hours a week are entitled to a higher pay rate for the additional work. Overtime pay refers to the compensation you receive for working beyond normal working hours. Employers shall compensate employees at the premium rate of 1.5 times the regular rate of pay for hours worked which exceed 40 hours of actual work in a workweek. The formula for calculating overtime premium pay is the nonexempt employee’s regular rate of pay x 1.5 x overtime hours worked.

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