Holiday Bonuses and Your Overtime Pay
Whether it’s for the holidays or new years, many employees are getting a pretty nice holiday gift, a holiday bonus in their paycheck. But that holiday bonus can affect overtime pay, as far as how much overtime you’re supposed to get under the Fair Labor Standards Act (FLSA), and many employers calculate that bonus incorrectly.
Increasing Overtime Pay Rates
The problem that employers have is that your overtime pay, if you do work overtime, is based on your regular rate of pay, which is calculated as your normal rate in the previous workweek.
Bonuses, however, raise your regular rate of pay for that work week, and that means that the calculation of how much overtime you should receive in that workweek, needs to be calculated on the increased hourly wage that you earned, increased because of the bonus you received.
Put another way, the bonus raises your regular rate of pay, which raises what overtime pay would be, and many employers don’t pay attention to that, and will pay the normal amount of overtime, based on your regular (non-bonuses) rate of pay, thus violating the FLSA.
Discretionary Bonuses
But not every bonus raises your base pay, and thus, your overtime pay. Some bonuses are not counted towards your regular rate of pay, and thus, don’t affect what overtime you would normally receive.
Discretionary bonuses are those that the employer can pay, at its discretion, in any amount that it wants. There is no previous agreement, contract, calculation or promise to pay the bonus. These bonuses are not earned. So, they don’t affect or increase your overtime rate of pay.
As an example, if you were told that if you did not use more than X number of sick days in the year, that you would get a bonus, and you earn the bonus, that is a bonus that is not discretionary, you met the requirements and the employer has to pay you, and it was earned so that bonus has to alter your regular rate of pay, and thus, the overtime that you earn.
As a rule of thumb, any bonus that is earned, whether through performance, or time with the company, or some other metric, is a bonus that is included in your regular rate of pay, and will increase what you’re supposed to be paid for overtime.
But if your employer just says “we’re giving people bonuses” and includes some random amount in people’s paycheck, that would not alter the rate of pay, and thus, wouldn’t alter overtime wages.
Special Occasions or Gifts
The gift, or special occasion bonus is treated similarly; again, if the bonus is pursuant to a previously existing contract or some measure of performance, it will and must alter (raise) your overtime rate of pay. But if it is solely for an occasion (holidays or birthdays, for example) then it does not alter your overtime calculation.
Are you being paid the correct amount of overtime? If not, you may have a claim against your employer, current or previous. Contact the San Jose employment attorneys at the Costanzo Law Firm today. ing paid the correct amount of overtime?
Source:
dol.gov/agencies/whd/fact-sheets/56c-bonuses
