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Employees Owed More Overtime When Employers Ignore Certain Bonus/Incentive Payments

We all know that overtime hours (hours over forty in a week) are paid at "time and a half."

Employees know it, employers know it, everyone knows it.

Many workers know it so well that they assume that the issue stops there-as long as they are paid 1.5 times their regular hourly rate, they are paid properly.

That is not always the case.

Employees who receive extra pay-like production or incentive bonuses, hiring bonuses, attendance bonuses, shift bonuses or premiums, or commissions-are typically entitled to a higher overtime rate than a simple "time and a half" of their regular hourly pay calculation.

Calculating Overtime Pay

An employee's overtime pay rate is calculated by multiplying their "regular rate of pay" by 1.5.

That's where "time and a half" comes from.

The "regular rate of pay" is calculated by dividing the total earnings in a workweek by the total number of hours worked during the week.

For employees who are compensated solely by an hourly wage, their "regular rate of pay" is the same as their hourly wage.

For employees who also receive additional pay, their overtime rate is more than 1.5 times their hourly rate of pay because employers are supposed to add extra pay to the regular hourly rate in order to calculate the regular rate of pay.

For example:

Suppose a nurse makes $25.00 per hour but also receives a shift bonus for any shifts she works during a weekend.

In a week where the nurse worked no weekend shifts, her overtime rate is simply $37.50 (1.5*$25).

But in weeks where the nurse worked weekend shifts, her overtime rate is higher.

Let's say the nurse worked 50 hours in a week and earned a $200 bonus for working one weekend shift.

Her overtime rate is actually up to $43.50 (($25 + ($200/50))*1.5).

So, for each of her ten hours of overtime, the nurse is owed up to $43.50 per hour, or six dollars per hour more than simply "time and a half" her hourly rate.

When must Extra Payments be Included when Determining the Overtime Rate?

With very few exceptions, when calculating the regular rate of pay, the employee's total compensation must be included.

The only bonus payments that can be excluded are truly discretionary payments/bonuses.

These are the type that surprise you when you get them.

To be excluded from the overtime rate calculation, the employer must have sole discretion on both (1) whether to make the payment; and (2) the amount of the payment.

If the employer pays a bonus after promising or announcing that it would in the future, the bonus likely becomes non-discretionary and must be included in calculating the overtime rate.

Common Examples of Non-Discretionary Bonuses that Increase the Overtime Rate

Each of these payments are likely non-discretionary and should be included in determining the overtime rate:

· Hiring Bonuses - These are typically paid over time, were promised to an employee when they were hired, and are forfeited if the employee leaves before the bonus is paid.

· Shift Bonuses - To motivate employees to take on extra shifts, the employer often sweetens the pot by paying shift premiums (a bump to the hourly rate) or shift bonuses (a lump sum).

· Production/Incentive Bonuses - The employer sets goals and if those goals are met, the employees receive a bonus.

· Sales Bonuses/Commissions - Employees earn sales commissions (ex. 1% of all sales) based on their job performance.

· Attendance Bonuses - Employers incentivize good attendance by offering extra payments for meeting certain attendance measures.

· Day Rates - Employers, for example in the oil field, pay employees additional amount of money on top of their regular earnings for each day that they work.

How Our Firm Can Help

Our practice is situated in the Austin area, which conveniently allows us to assist workers throughout Texas.

The statute of limitations for FLSA claims is two years (sometimes three). Employees who prevail on their FLSA claims could recover all their back pay during that time, double back pay, and attorneys' fees.

If you'd like to discuss a pay practice that may violate the FLSA, contact us at (512) 782-2293 for a free consultation. You can also send us an e-mail

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