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:
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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). 


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