Q: When calculating overtime pay, do I need to include discretionary bonuses?
A: Generally, there are eight categories of pay that can be excluded from overtime pay. These include
1. Gifts and payments on special occasions
2. Payments made for occasional periods when no work is performed such as vacation or sick pay, reimbursements for work-related expenses, and other similar payments that are not compensation for hours of employment
3. Discretionary bonuses, payments to profit-sharing, thrift, or savings plans that meet certain requirements, and certain talent fees
4. Contributions to a bona fide plan for retirement, or life, accident, or health insurance, or similar
5. Extra compensation provided by a premium rate for certain hours worked in excess of eight in a day, 40 hours in a workweek, or the employee’s normal working hours
6. Extra compensation provided by a premium rate for work on Saturdays, Sundays, regular days of rest, or the sixth or seventh days of the workweek
7. Extra compensation provided by a premium rate pursuant to an employment contract or collective bargaining agreement for work outside of the hours established therein as the normal workday (not exceeding eight hours) or workweek (not exceeding 40 hours)
8. Income derived from a stock option, stock appreciation right, or employee stock purchase plan
To view the rules in their entirety visit federalregister.gov.
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