A basic overview of bonuses under the FLSA

On Behalf of | Mar 5, 2021 | employment law

You may work hard all year, and thus look forward to your annual bonus. Many people in Denver use these bonuses to pay off bills, put into savings or simply spend as they wish. However, if you are wrongfully denied a bonus, it is good to have an understanding of what the law says about bonuses. Note that this post applies to workers who are considered non-exempt under the Fair Labor Standards Act (FLSA)

Can bonus be credited to overtime pay?

A bonus is a payment that is made above and beyond a worker’s normal earnings, including overtime pay. Under the FLSA, any compensation for hours work are included in the regular rate of pay. However, certain bonuses are excluded from the normal rate of pay. Specifically, unless noted otherwise, bonuses are excluded from the regular rate of pay. Moreover, bonuses cannot be credited towards overtime pay.

What is a discretionary bonus?

A bonus will be considered discretionary if the following elements are met. First, the employer has the sole discretion to determine whether the worker should be paid the bonus. Second, the employer has the sole discretion to determine how much the bonus will be. Third, the bonus must not be made due to a contract, agreement or a promise that such bonuses will be paid regularly.

What is a nondiscretionary bonus?

A bonus is considered nondiscretionary unless it qualifies as excludible under the law. The following are some examples of nondiscretionary bonuses. A bonus based on a predetermined formula is nondiscretionary. A bonus for quality and accuracy of the job performed is nondiscretionary. A bonus announced to all workers to encourage them to be more efficient is nondiscretionary. Attendance and safety bonuses are also nondiscretionary.

Learn more about employment law

Ultimately, this post is for educational purposes only and does not offer legal advice. To learn more about employment law in Denver, please feel free to explore our firm’s website for further information on this important topic.

 

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