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“If the bonus is intended as an incentive for additional hours worked, then that would constitute a performance-based reason for the bonus that would likely cause it to be characterized as nondiscretionary. “Whether bonuses to front-line workers are nondiscretionary or discretionary really depends on the underlying purpose of the bonus,” said Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City.

Safety bonuses (e.g., for a certain number of days without a workplace accident).

Bonuses announced to induce more-efficient work.

Bonuses for quality or accuracy of work.

Bonuses based on a predetermined formula (e.g., production bonuses).

“If a bonus is nondiscretionary within the meaning of the FLSA, the amount of the bonus must be added to the employee’s other compensation for purposes of calculating the employee’s regular rate, which is then used to calculate the employee’s overtime rate,” said David Weldon, an attorney with Neal, Gerber & Eisenberg in Chicago.Įxamples of nondiscretionary bonuses include: It excludes health insurance, paid leave, holiday and discretionary bonuses, and certain gifts. The regular rate includes hourly wages and salaries for nonexempt workers, most bonuses, shift differentials, on-call pay and commissions.

Under the Fair Labor Standards Act (FLSA), all compensation for hours worked and services rendered is included in the regular rate of pay. She added that discretionary bonuses, on the other hand, aren’t included in the regular-rate calculation when determining overtime.

“Most bonuses are nondiscretionary,” said Jennifer Shaw, an attorney with Shaw Law Group in Sacramento, Calif. A bonus to a front-line worker, even during the pandemic, might be considered nondiscretionary and, if so, should be included in overtime calculations.Ī nondiscretionary bonus is a bonus that employees know about and expect, and employers often forget to factor them into overtime pay, according to Steven Suflas, an attorney with Ballard Spahr in Denver and Cherry Hill, N.J.