The largest expense for most employers is the wage they pay their employees, which not surprisingly leads some companies to aggressively keep their employees’ wages and hours low. At the same time, smart companies know that you have to pay a fair wage to attract and retain good employees, and that often includes a regular bonus (whether at the end of the year or another regular period). Another key incentive for many employees is overtime; for many families, a few hours overtime makes a big difference when it comes time to pay the bills.
While most companies diligently follow state and federal wage and hour laws that require overtime wages at the rate of 1.5 times an employee’s regular rate (if only to avoid lawsuits and fines), others try and skirt the law by not accounting for regular bonus payments when calculating overtime wages. Under federal and most states’ laws, overtime wages must be based on an employees “regular rate.”
For hourly employees that do not receive a regular bonus, the calculation is easy – an employer simply multiplies the hourly wage by 1.5. However, when an employee receives a regular bonus, the employer is required to include that in the regular rate of pay, meaning that the overtime rate is more than 1.5 times the hourly wage. Whether through ignorance of the law or because they hope their employees don’t notice, many companies fail to include regular bonuses when calculating overtime rates. If you or someone you know is an hourly employee that receives a regular bonus and works overtime, please contact us to discuss your legal options.