The fluctuating workweek is a definition for Wage and Hour Laws defined by the US Department of Labor (DOL). Though the principle behind the fluctuating workweek was designed to protect employees from being paid lower-than-normal wages when the US Fair Labor Standards Act (FLSA) was made law in 1939, as of 2011, changes in how the fluctuating workweek is defined to more directly benefit employers. This allows employers to avoid paying excessive overtime pay to employees by structuring their pay as a salary instead of an hourly wage. As of 2011, the law was also updated to prohibit employers from paying bonuses and other types of wage premiums to employees hired under the fluctuating workweek model, which reversed a 2008 decision in the law that allowed these types of additional payments to be made.
While the fluctuating workweek standard is considered to be a valuable method of reducing administrative costs in payroll practices for employers, the rules themselves have been frequently changed and updated over the years and are very complex. Companies considering using the practice are advised to get legal guidance before doing so, as several points in the law can lead to areas of conflict between the employee and employer in such cases. Among the primary rules that must be considered are that the actual amount of hours that an employee works during each week must truly fluctuate, and the employee must be paid a salary instead of an hourly wage.
One of the weaknesses of the fluctuating workweek model for an employer is that the hours of the employee must be carefully controlled to avoid violating minimum wage laws. An employee under the plan is paid a fixed wage regardless of the hours worked in a week. If an employee works 40 hours in a week and is paid $400 US Dollars (USD), this amounts to $10 per hour. If, however, the employee were to work 60 hours the following week and be paid the same $400 USD salary, his or her hourly wage would be only $6.66 per hour, which could violate minimum wage laws. Though the employee would be paid an additional 50% of their wage for overtime pay on that 20 hours of extra work, the fluctuating workweek model would still violate labor law if minimum wage were set at $7 USD per hour.
The fluctuating workweek does not have to be documented in writing when an employee is hired, so this can also lead to conflict if wages change from week to week when broken down to an hourly basis. Professions where this is most often confusing can be ones where the hours normally fluctuate a great deal, such as in emergency medical and fire service or with seasonal workers who are in big demand when the climate is good and less demand when it is bad. The reason an employee can feel cheated in such circumstances is that overtime pay can be considerable when work weeks are long, and completely absent when they are not, which fluctuates the overall hourly rate they receive significantly.
One of the principles behind the FLSA model was to encourage employers to hire more employees using the fluctuating workweek so that they could save money on overtime pay when the employees weren't needed as much. As of 2011, however, the reverse has become the rule, with employers using the model to hire less employees. This is because it is more cost effective to pay a few employees overtime and give them excessive hours during busy seasons, than to undergo the account expenses that come with hiring new employees. Benefits that new hires are routinely offered often exceed their base pay in value, including health insurance and vacation costs. Other costs to an employer discourage it from hiring new people as well, such as increased administrative duties and paying unemployment insurance, so the fluctuating workweek method has come to be used as a way of minimizing new hiring as of 2011.