Inclusion of Bonuses in Overtime Rate Calculation
Is your overtime rate being calculated correctly? If non-discretionary bonuses are not being included in the calculation of the overtime rate, then the answer is no.
Examples of nondiscretionary bonuses include: bonuses based on a predetermined formula; bonuses for quality and accuracy of work; bonuses that are announced to employees to induce them to work more efficiently; attendance bonuses; and safety bonuses.
To properly calculate an overtime rate, an employer must follow the following steps:
Step 1: Total compensation for the week (except the statutory exclusions) ÷ Total hours worked in the week = Regular Rate per hour for the week (must be at least the federal minimum wage)
Step 2: Regular Rate x (.5) = Half-time premium for each overtime hour (note the straight time for the overtime hours is included in Step 1)
Step 3: Half-time premium pay rate x Overtime hours = Overtime compensation due.
If you believe there may be an issue with the way your employer pays your overtime, then
send us a message or call us at 734-234-5583.