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Calculating Overtime When an Employee Is Paid a Nondiscretionary Bonus - Worked Example

Author: XpertHR Editorial Team

Nondiscretionary bonuses - bonuses that an employer contracts, agrees or makes a promise to pay - can alter the way a nonexempt employee's overtime pay is calculated.

Employers must include such bonuses in a nonexempt employee's regular rate of pay when overtime is due. See Employee Compensation > Overtime > The Regular Rate.

The methods for calculating overtime vary depending on how long a period the bonus is intended to cover. When the bonus covers the work period, the calculations are fairly simple (see Scenario 1). When the bonus covers more than one work period, the calculations become more complicated (see Scenario 2).