Do incentive bonuses affect overtime-pay rate?
Issue: Your organization is modifying its incentive compensation approach and is looking at a couple of bonus programs. One question that has been asked is what impact, if any, these anticipated bonus plans could have on your overtime pay liability. • Everyone but recent hires receives a bonus if the company exceeds base-line financial goals for the previous calendar year. Bonuses and eligibility criteria are announced in advance, and amounts are based on the ratio of individual earnings to total employee earnings. • A Team Bonus Plan promises bonuses to sales personnel based on the amounts by which they exceed monthly sales targets. Eligibility criteria are set at the start of the year. However, management reserves the right to withhold bonuses in extraordinary circumstances and once did so due to serious employee misconduct. Must these bonuses be factored into regular-rate calculations when computing overtime pay? Answer: Yes. Both bonus plans call for incentive payments that must be
