Overtime calculations

seeleyhr

We currently have employees who earn incentives for the number of orders and reorders they are able to obtain in a month which is paid monthly. In addition to their base hourly pay of $7.00 per hour, they are paid additionally either $5 or $7 per order.

We have billing personnel that have an incentive that is calculated by goals for cash collections and reduction of accounts receivable. When goals are met incentives are paid monthly.

Additionally, we also place money in a pool which is paid out quarterly for other employees based on new business and billed services.

My question is should we go back and calculate overtime rates based on these incentitives.

sandra_d

It is my understanding that yes, you would owe overtime based upon an average hourly wage whenever bonuses are paid out that relate to the work being done. (A holiday bonus paid to everyone as a thank-you to employees, on the other hand, would not need to be added in for overtime purposes as it isn't promised in connection with work productivity, etc., but merely at the discretion of the company and beyond the ability of the individual employee to impact.)

Petard

I'm with Sandra. The incentive payments should be added in with hourly wages to determine the "regular rate," which is the basis for overtime premium pay.

It's great that you're providing incentives to your workforce (and I hope the incentives spur on better performance), but gosh--you're going to burn through lots of computers or calculators or Big Chief Tablets calculating all of those pay adjustments. To do it right, you should calculate weekly adjustments for each employee, adding the per-order incentives to the corresponding week in which they were earned.

Take the $7.00 hourly rate times all hours actually worked during the week. Add the per-order incentive payment for the week. Divide the sum by the number of hours worked, and that determines that week's regular rate. Assuming that you've already paid overtime at $10.50 per hour, the adjusted overtime pay that is due is the difference of 1.5 times the regular rate minus $10.50, for each hour of overtime during the week.

You might consider an order-incentive program that pays "x-percent" of total wages including overtime. A percent-of-all-compensation bonus can allow you to avoid having to go back and adjust prior overtime but remain in compliance.

seeleyhr

Thanks for your input. We are in the process of coming up with an acceptable method for putting this into place.