Bonus Plans

mlpokorney

Would anyone care to share their bonus plans?

Currently ours is calculated off of wages that include OT. If the bonus is 4%, then it's 4% of your wages. Very cut and dry, not favortism. Everyone is calculated the same. Problem is, our exempt people do not get OT so, they may be working the same OT hours as an hourly person, however, their wages do not change.

OT has to be paid on "wages" and for legal purposes, wages includes bonus; so, if we didn't pay the bonus on wages including overtime, we would have to, at the end of the year, recalculate what peoples wages were for (inclusive of the bonus) and then go back and adjust OT payments based on their revised wage.

We are trying to come up with a new bonus plan that is fair to all employee's.

Pork

I for one would suggest you get away from bonuses calculated against anything other than performance. Likewise, get away from a planned %! For End of the year (Christmas) we got an amount of money designated by the owners. Last year owners said every employee was to get at least a $50.00 award, given some was left over after that calculation, the management team was ask to suggest an amount of money based on performance and totally subjective qualities of the individual. The awards then ranged from $50.00 to $5,000.00. There was no way nor need to go back and calculate weekly earnings against o/t nor worry about exempt salaries, etc. 2002 was not a good year, this year though the owners ask for a submission of recommended bonuses for outstanding service. We accomplished the same system this year as last, the awards were from $0 to $4,000.00. Again there is no reason to go back and recalculate O/t and weekly wages, etc. It is all subjective. Even our quarterly production bonuses based on hitting production output objectives do not require a recalculation of past or future earnings and wage rates. Once the unit hits the quarters objectives we pay it out in a lump sum, if the individual has not had his bonus program suspended due to poor attitude or attendance record. Get away from your calculations against salary and wage rates and you can get away from your payroll HEADACHES! Pork

Petard

I beg to differ, Pork. True, if the bonus is entirely discretionary and subjective--if employees didn't know until the checks hit their hot little hands whether they would receive a payment--it can be excluded from the overtime adjustments. Otherwise, mlpokorney's approach is the proper way to pay the bonuses from an FLSA standpoint.

I'd definitely urge caution about paying "production bonuses" of flat dollar amounts if you disregard the effects on employees' overtime. If employees know how much they would receive if they "produce" at a certain level, then the bonus is not discretionary. The bonus dollars can be spread out over the performance period, but they add to the regular rate for each week of the period covered. If, on the other hand, even the production bonuses are at management's discretion, then I take it all back!

As to the original question, this is like the Democrats and Republicans arguing over taxes. What's fair is in the eye of the beholder. Assuming the exempt employees earn more than the nonexempt employees, then four percent of their pay produces an absolutely bigger bonus than the nonexempts receive. If the scales are still tilted, though, perhaps you could pay a five-percent or six-percent (or whatever) bonus to the exempts, and describe part of it as an overtime bonus. Then the bonus is both absolutely and relatively larger for exempts. You can do pretty much whatever you want to with the exempt folks.

If you figure out a fair alternative, perhaps you could pass it along to your Congressman!

Our bonus plan has differing percentage targets—the higher you are in the organization, the higher your target. The theory is that, while everyone contributes to the Company’s success, the supervisors and managers have more influence, control, and accountability for results. Therefore, they have a higher bonus opportunity. Besides that, most of our competitors provide bigger bonus opportunities to their higher-level employees, and we have to maintain competitive practices.

Trinity

We offer a profit sharing bonus. Essentially the CU has a target profit to hit and when we hit it through the work of all the depts., then we all get 4% of our annual salary. For every 80,000 over it we get another 1% until it caps off at 10%. We don't include overtime pay into the salary calculation. It is based on the salary you were assigned at the beginning of the year after the previous year-end review for raises and promotions.
It has worked really well for us.

sDiane4828

We are in the process of implementing a bonus plan. Do you have anything you are willing to share that may help me? Thanks!

Don D

My new company has a really neat plan worldwide. It's simply RONA, return on net assets. Each elibigle employee has 1 or 2 or 3 or 4, etc. RONA points. Each quarters calculations by the finance wizards results in a percentage figure to be used. If I have 2 RONA points given to me at hire, and the quarterly figure for return on assets is, say, 3%, then I get a check at the end of the quarter for 6% of what I made that quarter (2 RONA points x 3% = 6%). If finances are really up, the RONA calculation could conceivably become 20% and the annualized bonus could be conservatively 50-60% of salary or more. RONA points are established based on job grade and longevity. A new employee typically gets one RONA point at their first anniversary; however, these points are used in the negotiation stage for higher grades, just like vacation weeks are at most places. The quarterly paid bonuses can really rack up when profits are up and sales are sailing.