Avoid Wage & Hour Problems from Year End Bonus Payments to Hourly Employees
Preface: McNees publishes this helpful article on proper compliance with labor laws when paying employee bonus’
Many employers traditionally provide year end bonuses and holiday gifts for their employees. Bonuses may be included in a nonexempt employee’s regular rate depending upon the manner in which the bonus is calculated and the company’s prior communication. Inclusion in the regular rate impacts overtime calculations and payments….
For bonuses earned over more than one work week, the bonus must be allocated to pay periods to which the bonus applies and the regular rate recalculated. If overtime was worked during this period, the overtime rate must be revised to be time and a half the recalculated regular rate that includes the bonus payment…..
Discretionary Bonuses: This is an area of DOL audit scrutiny and should not be used on a regular or aggressive basis. Truly discretionary bonuses are not included in the regular rate of pay under section 778.211, if both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly……..
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Summary: Department of Labor laws have special rules for bonus payments, i.e. holiday or, discretionary. You should ensure compliance with an attorney on bonus payments that are unique to your business, to consistently comply with appropriate labor laws.