Does Your Bonus Raise Your Overtime Pay? Discretionary vs. Nondiscretionary Bonuses
- Under federal law, all pay for hours worked, services or performance goes into the “regular rate” used to calculate overtime, unless a specific exclusion applies.
- Bonuses you know about and expect, like production, attendance, safety or quality bonuses, are nondiscretionary and must be included.
- Truly discretionary bonuses and holiday gifts not tied to hours or production can be left out.
If you are paid hourly and earn bonuses, your overtime may be worth more than your paycheck shows. The FLSA requires overtime at time-and-a-half the regular rate, and the Department of Labor says “all compensation for hours worked, services rendered, or performance is included in the regular rate of pay” (DOL Fact Sheet #56C: Bonuses under the FLSA).
Bonuses that must be included
DOL lists examples of nondiscretionary bonuses that must be included in the regular rate:
- Bonuses based on a predetermined formula, such as individual or group production bonuses
- Bonuses for quality and accuracy of work
- Bonuses announced to employees to induce them to work more efficiently
- Attendance bonuses
- Safety bonuses (for example, days without safety incidents)
DOL adds that the employer having the option not to pay a promised bonus “does not make the bonus discretionary.”
Bonuses that can be excluded
A bonus is discretionary only if the employer has sole discretion, until at or near the end of the period, over whether to pay it and how much, and it isn’t paid under any prior contract, agreement or promise. Examples DOL gives include employee-of-the-month bonuses, severance bonuses, and bonuses for extraordinary efforts not awarded by pre-set criteria. Holiday gifts can also be excluded if they aren’t measured by hours, production or efficiency. The label on the bonus doesn’t decide it.
How the math works
A nondiscretionary bonus earned over a week is added to straight-time pay, then divided by total hours to get the regular rate. Each overtime hour is then owed an extra half of that rate. Bonuses earned over longer periods are spread back over the workweeks they cover. That is why a quarterly production bonus should often come with a small extra overtime payment.
What to check
- Do you get a bonus under a known formula or announced target?
- Did you work over 40 hours in weeks the bonus covered?
- Did your pay stub show any overtime “true-up” when the bonus was paid?
Published October 27, 2026. Sources are linked in the text.
Header image: original graphic by JobPayRaise.com.
Comments (1)
How to spread a bonus: when a bonus covers several weeks and the employer can’t pin it to a single week, the regulations allow it to be allocated equally across each week of the period, with extra overtime owed for each week where hours went over 40. Source: 29 CFR 778.209.