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The Fair Labor Standards Act (FLSA) specifies (among other things) a minimum salary requirement for an employee to qualify as exempt from their overtime regulations.

Can bonuses be included in that salary calculation?

  • This question was created as my original answer on this question was answering the general case of bonuses instead of the OP's specific question. Note that this is not an off-topic legal question as questions that a HR professional (and consequently a manager or small-business owner) should know the answer to have been deemed on-topic here. This can be answered by simply stating the relevant regulations (as I have done), it doesn't require interpretation of the law for a specific situation – Lilienthal Jun 16 '16 at 10:50
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Until December 1st 2016, bonuses cannot be considered at all for the FLSA overtime exemption salary requirement.

Once the upcoming changes to the FLSA overtime rules come into effect on December 1st 2016, up to 10% of the minimum salary can be made up of nondiscretionary bonuses and/or commissions:

Bonuses and Commissions May Now Be Included: In a somewhat surprising concession to employers, the new rules will allow non-discretionary bonuses, incentive payments and commissions to count for up to 10% of the minimum salary, provided these amounts are paid at least quarterly.

Details of the upcoming changes are outlined in my answer here. Further detail on the salary and duties tests are in my answer here.

Full details of the changes are covered in the United States Department of Labor's Wage and Hour Division's FAQ on the "Overtime Final Rule". I have reproduced the section on bonuses in full here:

NONDISCRETIONARY BONUSES AND INCENTIVE PAYMENTS

May employers use bonuses to satisfy part of the new standard salary level test?

Yes. The Department is changing the regulations to allow nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g. a bonus based on the specified percentage of the profits generated by a business in the prior quarter). The Department recognizes that some businesses pay significantly larger bonuses; where larger bonuses are paid, however, the amount attributable toward the EAP standard salary level is capped at 10 percent of the required salary amount.

For employers to credit nondiscretionary bonuses and incentive payments (including commissions) toward a portion of the standard salary level test, such payments must be paid on a quarterly or more frequent basis.

What's the difference between a discretionary bonus and a nondiscretionary bonus?

Nondiscretionary bonuses and incentive payments (including commissions) are forms of compensation promised to employees to induce them to work more efficiently or to remain with the company. Examples include bonuses for meeting set production goals, retention bonuses, and commission payments based on a fixed formula.

By contrast, discretionary bonuses are those for which the decision to award the bonus and the payment amount is at the employer's sole discretion and not in accordance with any preannounced standards. An example would be an unannounced bonus or spontaneous reward for a specific act.

May employers make a catch-up payment in the event that an employee doesn't receive enough in nondiscretionary bonuses and incentive payments (including commissions) in a given quarter to remain exempt?

Yes, if an employee does not earn enough in nondiscretionary bonuses and incentive payments (including commissions) in a given quarter to retain their exempt status the Department permits a "catch-up" payment at the end of the quarter. The employer has one pay period to make up for the shortfall (up to 10 percent of the standard salary level for the preceding 13 week period). Any such catch-up payment will count only toward the prior quarter's salary amount and not toward the salary amount in the quarter in which it was paid. If the employer chooses not to make the catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the quarter.

Does the Final Rule change how employers may use bonuses to satisfy the salary level for highly compensated employees (HCEs)?

No, the Department has not made changes to how employers may use bonuses to meet the salary level component of the HCE test. To claim the HCE exemption under the Final Rule, employers must pay workers at least the standard weekly salary level of $913 per week on a salary or fee basis, while the remainder of the total annual compensation may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation. Because employers may fulfill almost two-thirds of the HCE total annual compensation requirement with commissions, nondiscretionary bonuses, and other forms of nondiscretionary deferred compensation, the Department determined that it would not be appropriate to permit employers to also use nondiscretionary bonuses and incentive payments to satisfy the standard salary amount.

Source: Final Rule: Overtime, United States Department of Labor's Wage and Hour Division's, retrieved 2016-06-15.

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