Determining overtime can be a complex formula. Employees who work overtime are typically compensated at 1.5 times the regular pay rate for hours worked beyond 40 in one workweek. However, when calculating overtime pay, one of the areas that employers typically rely on a lack of knowledge is the extent to which year-end bonuses are included in calculating this pay rate.

The Lore Law Firm has been instrumental in helping workers get paid the full and proper rate of overtime pay they are due. This includes determining if their bonuses should be factored into determining their pay rate for overtime hours worked.

Calculating Overtime Rates Depends on Bonus Type

Whether bonuses factor into overtime pay depends on the bonus type. Bonus types vary between discretionary and non-discretionary.

Discretionary bonuses are paid out at the discretion of the employer. This means that the employer is not committed to paying, but may pay a bonus if it decides it is in the best interest of the business to do so. They include bonuses that are not typically tied to achieving specific goals or objectives and for which the employer has not promised a specific payment if achieved, such as for special recognition (employee of the month) and most holiday bonuses. So, some year-end bonuses are considered discretionary and not included in the overtime calculation if the employer has not created an expectation among workers that if certain things happen, they will be paid a certain bonus.

Non-discretionary bonuses are predetermined financial incentives that are essentially built into the employee’s compensation package. They include compensation for sales percentages, incentives to work certain days or shifts, or other situations where an employer promises to pay a bonus in exchange for certain work or achievements. In some instances, year-end bonuses are non-discretionary, especially when they are tied to achieving specific goals or objectives such as sales, profits, attendance, etc.

How Bonuses Factor Into Overtime Pay Rate Calculations

Factoring bonuses into overtime pay rates depends on how they are considered in an employee’s pay rate. Discretionary bonuses are not included in overtime calculations because the employer chooses to pay them based on performance or other factors.

Non-discretionary bonuses do typically factor into overtime pay rate calculations because these are predetermined financial incentives built into the employee’s compensation package. These bonuses are typically part of the entirety of the employee’s work contract and thus would be considered part of their “regular” rate of pay. Therefore, when determining overtime pay, the amount of such bonuses would be included in calculating an employee’s overtime rate, which would now be higher than the usual time and a half rate they typically receive for working overtime.

Get Help from a Qualified Overtime Pay Lawyer

If you are concerned about losing money due to bonuses not being included in calculating your overtime pay rates, you should seek legal advice from experts. This ensures that you get exactly what you are due in terms of overtime. As a qualified overtime pay lawyer, the Lore Law Firm has helped countless clients contend with employers counting on their lack of knowledge regarding overtime pay laws. We will pursue justice on your behalf to help ensure that your employer does not stiff you out of full and proper overtime pay by failing to include those bonuses provided to you for a job well done.

Contact us now for a free and confidential review by calling (713) 782-5291 or reaching out online to learn more.


Michael Lore is the founder of The Lore Law Firm. For over 25 years, his law practice and experience extend from representing individuals in all aspects of labor & employment law, with a concentration in class and collective actions seeking to recover unpaid back overtime wages, to matters involving executive severance negotiations, non-compete provisions and serious personal injury (work and non-work related). He has handled matters both in the state and federal courts nationwide as well as via related administrative agencies. If you have any questions about this article, you can contact Michael by using our chat functionality.