The holidays are, perhaps unnervingly, quickly approaching. For some employers, holiday time means bonus time. This time of year may also mark the end of a quarter where bonuses are routinely awarded. It's, thus, the perfect time for us to remind you about the treatment of bonuses paid to non-exempt employees under the Fair Labor Standards Act ("FLSA").
For those of you who are scratching your head, we may have some issues to deal with one-on-one. Yes, bonuses may count as compensation (and impact a non-exempt employee's regular hourly rate) under the FLSA. The question to ask becomes, "Is the bonus discretionary?" In other words, is it solely your company's call whether to pay the bonus? If the answer is yes, then you do not count the bonus toward the employee's regular hourly rate.
Now, did you announce that everyone would receive a bonus upon, say, meeting a productivity goal, or meeting a minimum number of hours without any missed time, or that everyone would receive a bonus because your company hit an economic milestone? If this answer is yes, then you must recalculate the employee's regular hourly rate for the time period covered by the bonus. Once that is done, you must determine if any overtime was paid to the employee. If the employee did have overtime during that period, you'll need to make an overtime adjustment payment based upon the increased hourly rate.
Some food for thought as we approach a season commonly associated with eating. Gobble up the turkey (get it? Gobble?), catch as much football as possible (get it? Catch?), and check out your bonus program (get. . . oh, never mind).