How to Calculate Overtime When You Receive a Bonus

overtime bonus calculation

We love bonuses. For all of our hard work, it is nice to be recognized and rewarded. Further, any bump in our bank accounts helps. However, with your bonus, it is important to be aware of how to calculate your overtime pay. This is because your bonus may positively impact your overtime rate of pay. Unfortunately, some employers do not properly account for your bonus when calculating your pay, which is a violation of California law.Closeup of a pencil pushing buttons on a calculator doing math calculations

Discretionary versus Non-Discretionary Bonus

It is first important to know that bonuses are put into two categories, “discretionary” and “non-discretionary”.

Discretionary bonuses are defined as “sums paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay.” So it is entirely by choice, not by obligation, that an employer awards discretionary bonuses.

Non-Discretionary bonuses are rewarded as part of an employment contract, policy, or some understood promise. These bonuses are generally tied to hitting sales targets, productivity, attendance, or some other performance measure.

Calculating Your Overtime

There is a misconception that overtime pay is calculated by multiplying an employee’s base hourly wage by 1.5 when an employee works over eight hours in a day and double when an employee works more than twelve hours in a day. This is an over-simplification that leads to wrong results when a bonus is involved.

The California Division of Labor Standards Enforcement requires that an employee is paid overtime based on their “regular rate” of pay, which is your base hourly pay PLUS any non-discretionary bonuses. So unfortunately, discretionary bonuses do not factor into overtime calculations.

So in order to calculate your regular rate of pay for overtime purposes, you would take the total number of hours worked in a week and multiply that by your base hourly wage. You would then add your bonus for the week. Then take that total and divide it by the total number of hours worked that week.

For example, if you worked 48 hours in a week, your base hourly rate is $12 per hour, and you received a $100 bonus for the week, your calculation would look like this:

((48 hours worked x $12 hourly wage) + $100 bonus) / 48 hours = $14.08 regular rate of pay.

Pencil Pushing a Button on a Calculator

You Need an Attorney

If your employer is improperly calculating your overtime pay and refuses to properly compensate you, contact Moss Bollinger. You have legal rights in California and we will use the full weight of the law to fight for you. We charge no up front fees for our services and are only paid if you get paid. Contact Moss Bollinger today by phone at (866) 535-2994 for a free consultation or reach us online.

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