Most bonuses require additional overtime calculation | Vigilant

Vigilant Blog

News, trends and analysis in employment law, HR, safety & workers' comp

Oct 3, 2013

Most bonuses require additional overtime calculation

A: No joke. Under the federal Fair Labor Standards Act (FLSA), the general principle is that a bonus essentially raises an employee’s regular rate (similar to an hourly shift differential). Unless a specific exception applies, wage and hour law dictates that you need to ensure that if any nonexempt employees worked overtime during the bonus calculation period, they receive an additional one-half of whatever the bonus added to their regular rate, for all overtime hours worked. So, if a $500 bonus ends up increasing a worker’s regular rate by 50 cents per hour, then for all overtime hours worked, you’ll need to add an extra 25 cents per hour. Giving everybody the same flat bonus amount is fine as long as the employees didn’t work any overtime during the calculation period, or they’re exempt from overtime, or a specific exception applies. Otherwise, you’ll need to do an individualized calculation for each nonexempt employee.

Want an easy way to pay bonuses to nonexempt employees without ever worrying about doing a special overtime calculation? Pay a percentage of total wages. That way, you’re already taking overtime into account. For information on exceptions to this general requirement to pay overtime on a bonus, plus example calculations, see our Legal Guides, “Effect of Bonus Payment Plans on Overtime Pay for Hourly Employees” (1317) and Effect of Bonus Payment Plans on Overtime Pay for Nonexempt Salaried Employees” (2265). Want more help with this issue? Contact us to learn about the benefits of partnering with Vigilant.

Q: We pay a bonus of up to $500 if employees meet certain production and safety goals. I heard at a seminar that we’re supposed to pay overtime on the bonus. Are you kidding me?!

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.
divider--carrot
About The Author

Karen Davis

Senior Employment Attorney Vigilant Law Group
  • Colorado College, B.A. in Chemistry
  • Lewis & Clark College, Northwestern Law School, J.D.
  • Attorney licensed in Oregon and California
  • Former competitive swimmer and current birder

Don’t Navigate Employment Issues On Your Own

Learn how Vigilant membership can help with your complex employment situations.
Scroll to Top