Most overtime violations aren't about unpaid hours — they're about the rate. The FLSA requires time-and-a-half of the regular rate: total workweek compensation including nondiscretionary bonuses, commissions, and differentials, divided by total hours. Pay 1.5x the base wage while a monthly production bonus rides along untouched, and every overtime week is underpaid — for every affected employee, going back years.
This checklist audits the whole chain: a payment inventory, the include/exclude rules, a four-question stress test for the word 'discretionary' (the most abused label in payroll), the recalculation mechanics for period bonuses, and a sample calculation worksheet that verifies what the payroll system actually does rather than what the vendor says it does.
Who should use this payroll audit checklist
- Employers paying attendance, safety, production, or retention bonuses to hourly staff
- Payroll administrators configuring OT true-ups
- Companies with shift differentials and night/weekend overtime
- Anyone preparing overtime premium data for W-2 reporting
What it helps prevent
- Systematic overtime underpayment across every OT week — multiplied by two or three years of look-back
- Bonus programs that quietly create FLSA liability with every payout
- 'Discretionary' bonus labels that don't survive scrutiny
- Collective actions built from one employee's paystub math
- Regular-rate errors surfacing on federal tax documents
What’s inside
- Part 1 — Payment Inventory
- Part 2 — Must Be Included
- Part 3 — May Be Excluded (narrowly)
- Part 4 — The 'Discretionary' Stress Test
- Part 5 — Recalculation Mechanics
- Part 6 — Sample Calculation Worksheet
Before you process payroll, terminate, classify, deduct, or respond to a claim, get the decision reviewed.
Faulkner HR Solutions helps Texas employers, nonprofits, municipalities, and growing businesses fix the people systems behind recurring workplace problems. If this resource raised a risk flag, do not guess your way through the next step.