May an employer make deductions from its exempt employees' bonuses?
Author: Jessica Sussman
Yes, employers may make deductions from exempt employees' bonuses without affecting the employees' exempt status under the Fair Labor Standards Act (FLSA). FLSA regulations require only that exempt employees be paid a guaranteed salary of at least $455 per week. Additional compensation above this salary amount, including bonuses, is usually based on an agreement between the employer and the employee. Prohibitions against improper deductions under +29 C.F.R. § 541.602(b) do not extend to such additional compensation provided to exempt employees. As a result, deductions from bonus payments paid to salaried exempt employees are permissible and do not affect the employees' exempt status as long as the bonus payments are bona fide and are not paid to facilitate otherwise prohibited deductions from the guaranteed salary.