Can year-end bonuses affect overtime pay?
Success Company has a long tradition of paying workers a year-end bonus equivalent to two weeks’ or four weeks’ straight-time pay. The Board of Directors votes on the distribution annually but has always given its approval. Employees count on the bonus, and management talks up this “perq” to job applicants. Must the amount of the bonus be included in overtime-pay calculations? ANSWER: No, the bonus probably does not have to be included under these circumstances, but the specific facts are crucial. Regular-rate calculations may exclude payments that are in the nature of a gift as a reward for service at Christmas or on other special occasions. A Christmas or year-end bonus may be based on a regular salary or pay for a standard workweek but cannot be measured by hours worked, production or efficiency. Furthermore, it may not be so substantial that the employees consider it a part of wages, and it cannot be paid pursuant to a contractual obligation. Holiday payments of $20, $50 or a $100
