Reminder: Overtime rate must include certain bonuses
Reminder for your Payroll folks: Certain bonuses must be included in the regular rate of pay. And if they’re not, the Dept. of Labor gets very upset.
Check out this recent example: Foremen for Bliss Roofing Inc. in Clackamas, OR, were paid nondiscretionary bonuses as part of their compensation.
But their employer failed to incorporate these bonuses in the regular earnings rates for overtime pay purposes, according to the DOL. That resulted in workers not earning time-and-a-half for overtime.
Another problem: The DOL found the employer paid roofers a flat rate for the number of houses they worked on – sometimes for 45 to 50 hours a week.
These practices led to problems with the Fair Labor Standards Act’s (FLSA) overtime provisions. And now the company has to pay $75,606 in overtime back wages.
Discretionary or not?
In order to stay in compliance with the FLSA, it’s important to confirm what kind of bonuses employees receive.
Nondiscretionary bonuses are those that employees know they’ll be receiving ahead of time based on meeting certain goals or other criteria. These bonuses must be factored into earnings rates for overtime pay.
But discretionary bonuses are awarded by an employer after the fact, not announced ahead of time.
When in doubt, clarify with HR and supervisors: What type of bonus have they discussed with employees?
Free Training & Resources
Further Reading
A recent appellate court decision in Ohio should catch the attention of any business leader managing workforce risk. In Shephard v. Cro...
The median time to complete a monthly financial close is six days – and for some organizations, it takes as long as 10, according to the ...
College students can’t stand the 150 credit hour requirement to sit for the CPA exam. Employers are desperate to find the next wave o...
New Jersey’s highest court has ruled that commissions are always wages under the state’s Wage Payment Law, reviving a sales employee’...
The Secure 2.0 Act became law just before the close of 2022, as part of the federal spending bill. Roll up your sleeves – the list of ...
Late payroll-tax deposits will be more expensive, effective July 1. The IRS set the interest rate on tax underpayments at 7% for Q3, up ...