Christmas Bonus

CTAYLOR · October 2004

We pay our employees a Xmas bonus based on the number of years you have worked for the company. Does this have to be included when calculating hours worked for non-exempt?

Shadowfax · October 2004

I think Holiday and other discretionary bonuses may be excluded from a 'regular rate' computation for purposes of o/t payment. See 778.11.

Pricehcs · October 2004

The Department of Labor usually classifies Christmas bonuses as gifts which employers need not include in the calculation of an employee's regular rate of pay. To be considered a "gift", the amount paid to the employee must be unrelated to hours worked, efficiency or production. Additionally, the amount of the "gift" cannot be so substantial that the employee considers it part of his regular wages. Finally, if the employer makes the bonus payment pursuant to any type of contract of agreement, it is not a gift and the employer must include it in the calculation of the regular rate of pay. Employers also may exclude discretionary bonus payments when calculating an employee's regular rate of pay. To be considered discretionary, both the amount of and the decision to make the payment must be within the sole discretion of the employer. Payments are not discretionary, and thus must be included in the calculation of an employee's regular rate, if they are made pursuant to a contract, agreement or promise which causes the employee to expect such payment. If the employer promises in advance to pay a bonus, the element of discretion is lost and the employer must include the payment in the calculation of the employee's regular rate.

#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o

stilldazed · October 2004

A key part of your question is whether the "bonus" is discretionary or nondiscretionary. Sounds like it may not be. Only discretionary awards (not expected by employees, not promised based on satisfaction of specific criteria well ahead of time, minimal value) would be exempted. Sounds like yours might be well known and expected. I think calling it discretionary will be a hard sell.

SMace · October 2004

IMHO, just becasue they give it every year does not mean it's not discretionary. If it is communicated that it is not guaranteed and is dependent on how the business is going you are fine. Now if the business hit the crapper and they start wage reductions and still give the bonus, that's another story. But if business has been good for ten years and they've done it every year, that does not destroy the discretionary status. Just remember if the business does go south and you start to make cuts, you probably need to start with the "Christmas bonus".

stilldazed · October 2004

Absolutely correct. Sorry I didn't make that point clear enough.

Christmas Bonus

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