Overtime Laws

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Overtime Bonuses Not Included in Overtime Calculation

The FLSA provides that non-discretionary bonuses and shift differentials must be included in the regular rate of pay when calculating overtime pay. Non-discretionary bonuses include those that are announced to employees to encourage them to work more steadily, rapidly or efficiently, and bonuses designed to encourage employees to remain with a facility. Most bonuses are considered non-discretionary under the FLSA.

Bonus Example:

An employer gives an employee a $100 bonus if the employee is not late to work during a pay period. If the employee works more than 40 hours in any week of the pay period, the $100 bonus must be included in calculating the overtime rate of pay (1.5 time the regular rate).

Example: Employee is paid $15 per hour, and the pay period is bi-weekly. The employee works 45 hours each week and is not late so he or she earns the $100 bonus. The bonus is divided between the two weeks ($50 each week) and added to the hours that week( 45 x $15/hour + $50 weekly bonus = $725) This amount is divided by the number hours worked to determine the regular rate of pay (725 / 45 = $16.11/hour). The overtime rate for the 5 hours of OT worked is 1.5 times the regular of pay (16.11 x 1.5 = $24.165/hour) The total OT pay due would be, $24.165 x 5 = $120.82.

Shift Differential Example:

A nurse earns $20/hour. If the nurse works a night shift, the nurse is paid an extra $5/hour for these shifts. During a work week, the nurse works 48 hours including 24 hours on night shift. The overtime rate is 1.5 time the regular rate of pay. In order to determine the regular of pay, the total pay (including shift differential) is divided by the total number of hours worked. The regular rate of pay is then multiplied by 1.5 to determine the overtime rate for the 8 hours of overtime that week.

• ((24 x $20/hour) + (24 x $25/hour) = 1080)
• 1080 / 48 = 22.5/hour Regular Rate of Pay
• 22.5 x 1.5 = $33.75/hour Overtime Rate

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