How to calculate overtime pay when bonuses are involved

Working overtime has become the norm in today’s workplace. Companies use bonuses to incentivize their workers to work longer and harder. However, when it comes to understanding how and if employees are going to be paid for their overtime, the process of knowing how to calculate overtime can be quite challenging, particularly when bonuses are involved. To help make this process a little easier, below are few steps to keep in mind in order to accurately calculate overtime when employees are paid bonuses. 

This article assumes that the worker being paid bonuses is entitled to overtime pay (and for more on that issue, click here).  In being able to effectively calculate one’s overtime, an employee has to take into account any deductions, bonuses, or other forms of compensation that can affect the amount of overtime. One common bonus given to employees is known as a non-discretionary bonus, which is a bonus that the employee expects to be paid and is commonly used for performance-based pay.

If the employee receives a bonus:

Step 1: Determine the total straight-time pay

Determine if the employee has any additional forms of compensation apart from his or her regular pay, including bonuses. For example, a non-exempt employee works 50 hours a week and is paid $20 an hour for each hour worked (in other words, the employee receives a flat hourly rate for all hours). The employee receives a $100 non-discretionary bonus for his performance. 

Start by taking the $20 (hourly rate) x 50 (hours worked) + $100 (bonus) = $1,100 (total straight-time pay) 

Step 2: Determine the regular rate of pay 

Take the $1,100 (total straight-time pay) divided by 50 (hours worked) = $22 (regular rate of pay)

Step 3: Determine the overtime pay amount

$22 (regular rate of pay) x .5 (overtime rate, as the employee was already paid regular time for his hours over forty) x 10 (number of overtime hours worked) = $110 (overtime pay).

Step 4: Determine the total compensation the employee is entitled to

$110 (overtime pay)  + $1,100 (straight-time pay) = $1,210 (total compensation) 

If the employee does not receive a bonus:

If the employee receives no additional forms of compensation, there are only two steps that have to be taken in order to determine how much overtime is due. From the example above, a non-exempt employee works 50 hours a week and is paid $20 per hour.

Step 1: Determine straight-time pay 

$20 (Regular rate of pay) x .5 (the overtime rate) = 10

Step 2: Determine the amount in overtime due

10 x 10 (the overtime hours worked) = $100 in overtime pay 

Being able to effectively calculate one’s overtime is is important – everyone should know how much they are legally required to be paid. If you have questions regarding how to calculate your overtime pay and whether you are entitled to overtime, consider speaking with an attorney today. Josh Borsellino is an experienced overtime attorney who will fight for your rights. He works on a contingency basis meaning that you owe him nothing unless you get paid at the resolution of the case. He can be reached at 817.908.9861 and 432.242.7118.

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