What is the difference between the fluctuating workweek compensation method and a Belo contract?

Many employers have employees who do not work a regular schedule of 40 hours per week. For example, they may work 25 hours one week and 50 hours the next week. For ease of administration, an employer may wish to pay such employees on a salaried basis. In these instances, an employer could consider implementing either a fluctuating workweek method or a Belo contract. Though these two plans are similar, there are some key differences to consider.

The fluctuating workweek method is a way to comply with the overtime pay requirements of time-and-a-half pay for all hours worked in excess of 40 in a workweek when an employee’s time fluctuates from week to week. Fluctuating workweek salaries are typically paid to employees who do not customarily work a regular schedule. The salary amounts are agreed to by the parties as adequate straight-time compensation for long and short weeks, the U.S. Department of Labor (DOL) notes in its FLSA regulations (29 C.F.R. §778.114).

Fluctuating workweek overtime may be used if several conditions are met:

• There must be a guaranteed weekly salary that is paid if the employee performs any work during the week.
• The hours of the employee must fluctuate from workweek to workweek.
• The regular hourly rate of pay that is used to base the half time overtime rate must be at least the minimum wage.

Although the salary does not vary under this compensation method, the regular hourly rate does vary from week to week. For example, if an employee’s salary is $600 a week and the employee works 40 hours one week but 44 the next and 48 the following, the regular rate would go from $15 to $13.64 and then $12.50. Employers must ensure that the regular rate does not fall below federal, state or local minimum wage requirements. 

See Fact Sheet #82: Fluctuating Workweek Method of Computing Overtime Under the Fair Labor Standards Act (FLSA) / "Bonus Rule" Final Rule and DOL Opinion Letter FLSA2020-14.

An alternate method of paying employees who work a varied work schedule is a Belo contract. A Belo contract is another compensation method that has a weekly guaranteed wage plan; however, it is even more restrictive than the fluctuating workweek method. To be valid, the following conditions must be met:

• A written contract outlining the pay arrangement. The fluctuating workweek method does not require a written contract, only an understanding of the pay arrangement.
• Irregular hours must be inherent to the position. Neither the employer nor employee can control or reasonably anticipate the number of hours that will be worked each week. Examples of jobs that can use Belo contracts include outside buyers, on-call service professionals, insurance adjusters, newspaper reporters and photographers.
• There must be a great variation in the number of hours worked each week above and below 40 hours. If this does not or will not occur, the Belo contract will be invalid.
• The regular rate of pay must be at least the minimum hourly rate and can only include wages for time worked. It cannot include other compensation such as bonuses.
• The contract must also provide for payment of a maximum number of overtime hours at a rate of at least one and a half times the regular rate.
• The maximum number of hours worked for the guaranteed pay cannot be more than 60 hours per week. If the employee works more than 60 hours in the workweek, he or she must be paid at least time and a half for the additional hours.

If an employer chooses to use the Belo contract method, it must ensure that all the above criteria are met; otherwise, the employer would not be able to use this method and would need to consider other compensation methods.