Bonus

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The U.S. Department of Labor (DOL) has issued a final rule under the Fair Labor Standards Act (FLSA) expressly authorizing employers to offer bonuses, hazard pay, and other premiums to employees whose hours, and regular rate of pay, vary from week to week.

The final rule revises 29 CFR §778.114, which is the DOL regulation that specifies how overtime is to be computed for salaried, non-exempt employees who work a fluctuating workweek. The new rule clarifies that bonuses, premium payments, commissions, and hazard pay on top of fixed salaries are compatible with the fluctuating workweek method of compensation and that employers must include such variable compensation when calculating an employee’s regular rate for overtime purposes. The final rule includes example calculations to illustrate how to factor in such payments.Continue Reading DOL Green Lights Bonuses for Employees with Fluctuating Work Schedules

As the holiday lights start to fade, we come to one of the most anticipated times of the year – bonus season!

Such a happy time. Who doesn’t love getting a bonus, and what employer doesn’t like rewarding good performance with some extra monetary recognition? Bonuses are great, but keep in mind that they also…

iStock_000009138140XSmall[1].jpgOne of the more surprising changes in the new FLSA overtime exemption rules is a provision allowing  certain bonuses, commissions, and incentive pay to count for up to 10% of the new increased minimum salary level. However, the rule provides that only “nondiscretionary” bonuses, incentives, and commissions can be counted. So what exactly does “nondiscretionary” mean?

The new rules don’t actually define “nondiscretionary,”  but another part of the FLSA regulations (specifically 29 C.F.R. § 778.211), provides some guidance here. That section discusses which bonuses can be excluded from the “regular rate” used to calculate overtime for non-exempt employees because they are discretionary:
Continue Reading What Bonuses and Incentive Payments Count As “Discretionary” Under The New Exemption Rules?

In our last post, we discussed the calculation of the “regular rate” and some of the complexities of determining what constitutes “remuneration” under the Fair Labor Standards Act (FLSA). Commission is one of the additional forms of compensation that you must include in a non-exempt employee’s regular rate. Such a calculation is relatively straightforward…

iStock_SantaMoney.XSmall.jpgAs 2012 comes to a close, we inevitably receive questions related to year-end bonuses.  Last year, I posted about whether employers were required to pay a pro-rata bonus to those employees who left their employment before the bonus was paid out.  This year, I thought it might be helpful to remind employers of certain rules relating to bonus payments made to non-exempt employees.

Bonus Payments and Overtime

The Fair Labor Standards Act (FLSA) requires that overtime pay be determined using the employee’s “regular rate” of pay, which includes all earnings paid to the employee during the workweek.  However, the FLSA specifically provides that certain earnings may be excluded from the regular rate, including certain bonuses where:

(a) the bonus remains completely within the employer’s discretion, which the employer exercises close to the end of the period for which the bonus is paid, and is in no way required by any contract, agreement, or promise such that employees may expect the bonus, or

(b) the bonus payments are made pursuant to a bona fide profit-sharing plan or trust or bona fide thrift or savings plan; 29 CFR § 778.200(a). 

Continue Reading Don’t Forget to Include Non-Discretionary Bonuses in Overtime

XMasBonus.Revised.XSmall.jpgAs the end of the year rolls around, we inevitably are asked questions related to the payment of bonuses, particularly for those employees who are terminated before annual bonuses are paid out.  Of particular interest is whether an employee who has been terminated – voluntarily or involuntarily – is entitled to a pro rata share…