DOL issues guidance on bonuses and regular rate of pay

The Department of Labor (DOL) has issued new guidance for employers on bonuses as they apply to the regular rate of pay.

Of course just six months ago the feds issued new regular rate of pay rules for the first time in 50 years.

The good news: DOL Fact Sheet #56C spells out some key exceptions that can keep your company from paying more than it has to.

Check out what the DOL has said now to ensure Payroll is calculating properly.

Focus on bonuses for non-exempt workers

The new DOL Fact Sheet specifically speaks to non-exempt workers. It outlines how and when bonuses get calculated towards overtime.

As a rule, you calculate non-discretionary bonuses as part of the regular rate of pay. And your company can exclude discretionary bonuses.

Now the DOL offers you specific examples of discretionary compensation to help your company understand what counts and what doesn’t. Specifically, your company won’t have to include these in non-exempt workers’ regular rate of pay:

• bonuses for overcoming a challenging or stressful situation
• bonuses to employees who made unique or extraordinary efforts not awarded according to pre-established criteria
• employee-of-the-month awards
• severance bonuses, and
• referral bonuses to employees not primarily engaged in recruiting activity. (This one is subject to additional criteria.)

The timing couldn’t be better on this guidance. Many of them are scenarios you and your peers may be employing during the coronavirus pandemic, whether to motivate folks during tough times or to help them during unavoidable layoffs.

Excluding these from overtime calculations keeps your costs down and your company in compliance. But they must meet all the statutory requirements:

• You as employer have the sole discretion, until at or near the end of the period that corresponds to the bonus, to determine whether to pay it
• You have the sole discretion, until at or near the end of the corresponding period, to determine the amount of the bonus, and
  
• The payment isn’t made according to any prior contract, agreement or promise causing an employee to expect those payments regularly.