Bonus Pay- 3 Interesting Facts

Pay and overtime issues January 19th, 2024
Bonus Pay Bonus Pay

Under California law, a bonus is defined as “Money promised to an employee in addition to the monthly salary, hourly wage, commission or piece rate, which are usually due as compensation. Bonuses are in addition to any other remuneration rate and may be predicated on performance over and above that which is paid for hours worked, pieces made, or sales completed.”

The bonus may be non-discretionary, which means it is required by law or promised by the employer. It may become discretionary, depending on contractual agreements made between the employer and employee. Bonuses are covered under the Wage and Hour Division of the U.S. Department of Labor, Fair Labor Standards Act (FLSA) wage laws provision.

Non-Discretionary Bonus

According to employment law, a bonus is non-discretionary when it has been promised by the employer and the employer cannot alter the timing or amount of the bonus without breaching the employer/employee agreement. Some examples of non-discretionary bonuses include:

  • Bonuses are required due to a collective bargaining agreement.
  • Employer-announced bonuses based on increased employee performance.
  • A bonus is promised if there are a certain number of days without a workplace accident.
  • A bonus is promised in the hiring process.
  • Seniority bonuses.
  • Production bonuses.
  • Attendance bonuses.

These are non-discretionary because they are announced to the employees in a way that the employees expect the bonus if the announced criteria are met.

A Non-Discretionary Bonus Pay May Impact Your Overtime Pay Rate

A non-discretionary bonus may affect your overtime pay since the bonus is expected and included in the calculation of the regular rate of pay. The FLSA requires the regular rate of pay to include “all remuneration for employment, subject to [certain] exclusions.” Consult your employment lawyer to discuss whether your bonus is included in your regular rate of pay, which affects your overtime pay, or whether it should be classified as discretionary or meets one of the exceptions.

Discretionary Bonus Pay

According to the FLSA, a discretionary bonus is one that meets all the following criteria.

  • The bonus is entirely up to the whim of the employer. Employees do not expect the bonus. They may hope for it, but they know not to plan on it.
  • The amount of the bonus is also entirely up to the decision of the employer. There is no fixed amount required even if the employer has given a similar bonus in the past.
  • The bonus is not made based on any agreement between the employer and the employee.

Examples of a discretionary bonus include:

  • Overcoming a challenge.
  • Employee-of-the-month bonuses
  • Severance bonuses.

Contact D.Law to Learn More About Discretionary and Non-Discretionary Laws

If you have questions about whether your employer is providing discretionary or nondiscretionary bonuses, contact your employment lawyer at D.Law online or by calling (818) 275-5799. We serve those in the Bay Area, San Diego, Fresno, LA, and other areas of California. We represent employees who have issues related to illegal actions by their employers.

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