If You Get Bonuses or Incentives, You Might Not Being Getting the Correct Overtime Pay

California labor law requires that where non-discretionary bonuses, incentives, commissions, and spiffs are given to non-exempt (i.e., hourly) employees, that the amount of the bonus be included in the calculation of hourly rate to determine overtime pay.

For example, if you work at a retailer that gives you an extra five dollars every time you get a customer to sign up for your company’s rewards program, that five dollars needed to be added to your hourly rate for over time pay. A calculation might look like this: If you get paid $14 per hour, your overtime rate is $21 per hour (time and a half). So if in a regular week you earn 40 hours of regular pay and three hours of overtime, your gross pay would be $623 (i.e., ($14 x 40 hours = 560) + ($21 x 3 hours = 63)). However, if in the same time period you earned $25 in bonuses, your pay would not be $623+$25 = $648. Instead, your overtime rate would change. To figure out the change we would take the $560 of regular time and add in the $25 of bonuses. This equals $585. Then we divide the $585 by your 40 hours of regular time and your hourly rate increases to $14.63 which makes your overtime rate for this pay period $21.95. Now with this newly calculated overtime rate, your pay when you earned $25 in bonuses would look be: $650.85 (i.e., ($14 x 40 hours = 560) + ($21.95 x 3 hours = 65.85)+($25 bonus)). This is $2.85 more than if you just added the bonus to the pay without adjustment.

When an employees income is miscalculated due to the failure of adjusting the overtime rate to account for non-discretionary incentives, commissions, spiffs, and bonuses, we can go back 4 years and reclaim all of your lost pay, plus interest, penalties, and attorneys’ fees.