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The regular rate for code TT: bonuses, shift pay and the tip credit
Last reviewed October 6, 2026, against FS-2026-13 (August 2026) and the 2026 W-2/W-3 instructions.
Code TT uses the FLSA regular rate, not the base hourly rate. If a non-discretionary bonus or other includable pay is left out, both the overtime pay and code TT come out too low.
General information, not tax or legal advice. The employer remains responsible for its Forms W-2. IRS FAQs are not binding law. Check your facts with a CPA or your payroll provider. Halfmark is not affiliated with the IRS.
What the regular rate includes
All remuneration for employment, except the payments the statute excludes, divided by the hours actually worked in the workweek (FS-2026-13, Q15; 29 U.S.C. 207(e); 29 CFR 778.109). In practice that includes:
- hourly pay, salary for the hours it covers, piece rates and commissions;
- non-discretionary bonuses: production, attendance, safety, retention or other bonuses promised in advance or expected (29 CFR 778.211);
- shift differentials and other premiums that are not true overtime premiums (29 CFR 778.207);
- for tipped employees, the tip credit the employer takes (29 CFR 531.60).
What it excludes
- discretionary bonuses (both the fact and the amount at the employer's sole discretion), gifts (29 U.S.C. 207(e)(1), (3));
- pay for time not worked such as vacation, holiday and sick pay, and expense reimbursements (207(e)(2));
- certain benefit plan contributions (207(e)(4));
- true overtime premiums: daily or weekly overtime premiums, and premiums of at least 1.5 times for weekend, holiday or sixth/seventh-day work (207(e)(5)–(7); 29 CFR 778.202, 29 CFR 778.203);
- tips above the tip credit (29 CFR 531.60), and mandatory service charges are not tips at all (29 CFR 531.55).
Example: weekly production bonus
45 hours at $18 plus a $90 production bonus for the week. Regular rate = ($810 + $90) ÷ 45 = $20.00. Code TT = 5 × ½ × $20 = $50.00. If payroll paid overtime at 1.5 × $18, the premium paid was 5 × $9 = $45, which is $5 short of the FLSA premium. Halfmark flags this instead of quietly reporting $50, because code TT reports qualified overtime paid (FS-2026-13, Q10, Q21). Fix the pay first; then the reporting follows.
Bonuses that cover more than one week
A monthly or quarterly bonus has to be apportioned back over the workweeks in which it was earned. If the exact split isn't possible, the regulation allows an equal amount per week or an equal amount per hour worked (29 CFR 778.209). Example: a $200 monthly bonus over four weeks of 45, 40, 48 and 42 hours, $20 an hour, equal amount per week ($50 each):
| Week | Hours | Bonus per hour | Extra code TT |
|---|---|---|---|
| 1 | 45 | $50 ÷ 45 = $1.111 | 5 × ½ × $1.111 = $2.78 |
| 2 | 40 | $1.25 | no overtime: $0 |
| 3 | 48 | $1.042 | 8 × ½ × $1.042 = $4.17 |
| 4 | 42 | $1.190 | 2 × ½ × $1.190 = $1.19 |
| Extra code TT from the bonus | $8.14 | ||
The extra overtime is paid with the bonus, so it counts in the year the bonus is paid (FS-2026-13, Q3). A December bonus paid in January belongs to the next year's code TT.
Tipped employees and the tip credit
For an employer taking the federal tip credit, the regular rate is the cash wage plus the tip credit; tips above the credit are not included (29 CFR 531.60). Example: $2.13 cash wage plus a $5.12 tip credit = $7.25 regular rate. 45 hours: code TT = 5 × ½ × $7.25 = $18.13 (rounded from $18.125). The employee's tips are reported separately in code TP, see code TP and box 14b.
Find bonus weeks and missing premiums in your registers: import registers and hours, recompute code TT per workweek, and compare with your provider. Runs in your browser; payroll data is not uploaded.
Open the worksheetSources
- IRS FS-2026-13, Q3, Q10, Q12, Q15, Q21
- 29 U.S.C. 207(e); 29 CFR 778.109, 29 CFR 778.110, 29 CFR 778.115, 29 CFR 778.202, 29 CFR 778.203, 29 CFR 778.207, 29 CFR 778.209, 29 CFR 778.211, 29 CFR 531.55, 29 CFR 531.60