Holiday bonuses may boost overtime pay scales
Although tracking employee pay is simple when the only compensation workers receive is an hourly wage, bonuses can complicate the matter.
In general, bonuses given to non-exempt employees will factor into their hourly earnings in the workweek in which it was disbursed, affecting the calculation of overtime pay, according to labor attorney Kevin Ha of Dorsey & Whitney LLP. Bonuses that have anything to do with employee attendance and productivity, or are contractually obligated, promised or otherwise guaranteed, are considered to be part of a worker's regular earnings and included when overtime is paid.
The Fair Labor Standards Act includes some exceptions that may disqualify holiday bonuses from being included in regular wages. The FLSA clearly states that it does not regulate non-production cash bonuses, which are not associated with any employee productivity metrics. A bonus that is gifted to hourly employees but does not depend on any sort of quality or quantity benchmark and is not guaranteed is therefore not included when calculating overtime.
To ensure that holiday bonuses don't cause employers to pay more than they thought they should when calculating overtime, Ha recommends a few safeguards. The bonus should both be consistently described as a gift without a guarantee of payment and should not be explicitly promised to employees ahead of time.
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