Q&A: Do vaccine incentives have to be included in OT calculations?
Question: We want to offer a cash incentive to our employees who have been vaccinated for COVID-19 (coronavirus) in order to encourage vaccination rates in our workforce, but we don’t want to recalculate the employee’s “regular rate” for overtime. What can we do? Answer: You’re in luck! The U.S. Department of Labor (DOL) updated its COVID-19 and the Fair Labor Standards Act (FLSA) Questions and Answers on April 26, 2021, and clarified that employers can treat the payment of vaccination bonuses or incentives as gifts that can be excluded from the regular rate of pay. The payment is still taxable income to the employee under IRS rules, but you don’t have to recalculate the regular rate for overtime purposes under FLSA rules. And, as we previously reported, best practice would be to provide other avenues to earn the incentive for employees who can’t get vaccinated due to disabilities or sincerely held religious beliefs. For guidance on calculating overtime when awarding other types of bonuses, see our Legal Guides, Effect of Bonus Payment Plans on Overtime Pay for Hourly Employees and Effect of Bonus Payment Plans on Overtime Pay for Nonexempt Salaried Employees. As always, talk with your Vigilant Law Group employment attorney for guidance on your particular situation.
This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.
About the Author
Employment & Labor Attorney
Vigilant Law Group
Eastern Michigan University, B.S. in philosophy and political science
Lewis & Clark College, Northwestern School of Law, J.D.
Attorney licensed in Oregon and Washington
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