Re: Bonuses

From: Cara Levinson
Email: CaraBLevinson@aol.com
Date: February 08, 2005

Comments

To the extent possible, an employer should keep bonuses for at-will employees discretionary. Your employee manual should reflect that bonuses given, if any, will be at management's sole discretion. When bonuses change from a discretionary gift to an expected part of income, there is an effect on what's known as the "regular rate." So, for example, if someone receives an Xmas bonus of $300 one year and $150 another and the employer has made it clear that any bonuses are simply discretionary, there is no effect on the employee's "regular rate." If, on the other hand, every year the center gives $300 Xmas bonuses and employees come to expect it, then that $300 should be treated as wages. It is then added to the employee's income, and when divided by the total number of hours worked per year becomes the employee's new "regular" or "hourly" rate for the purpose of computing overtime. In other words, once a bonus is treated as wages rather than as a gift, it raises the non-exempt employee's hourly rate so that that overtime should be paid as 1-1/2 times this higher hourly rate.