If you earn overtime and also receive a bonus, your overtime may be higher than a simple hourly calculation suggests. This guide explains which bonuses count, how to calculate the extra overtime for a weekly bonus, and how to spread a quarterly or annual bonus across the weeks it was earned.
Why a bonus can raise your overtime pay
Under the Fair Labor Standards Act (FLSA), overtime is not based only on your hourly wage. It is based on your regular rate of pay, which the statute defines to include all remuneration for employment with certain listed exceptions (29 U.S.C. 207(e)). A bonus that you earned for work, such as an attendance bonus, a production bonus or a safety bonus, is generally part of that remuneration. When you also work more than 40 hours in a workweek, the bonus raises your regular rate, and the overtime premium for that week must be recalculated on the higher rate. Employers who calculate overtime only on the base hourly wage can shortchange employees who receive these bonuses.
Discretionary vs. nondiscretionary: the test
Only truly discretionary bonuses can be left out of the regular rate. The Department of Labor's regulation at 29 CFR 778.211 says a bonus is discretionary only if both the fact that it will be paid and the amount are determined at the sole discretion of the employer, at or near the end of the period, and not pursuant to any prior contract, agreement or promise that would cause the employee to expect it. A bonus that was announced to employees to encourage them to work more steadily, faster or more efficiently is not discretionary, because it is meant to influence how employees work. The employer's label does not control; the facts do.
How common bonuses are generally treated for overtime
| Type of bonus | Counts in the regular rate? | Why |
|---|---|---|
| Attendance or perfect-attendance bonus | Yes | Promised in advance to encourage attendance |
| Production or productivity bonus | Yes | Tied to output, announced in advance |
| Safety bonus | Yes | Announced in advance for meeting a condition |
| Quality or accuracy bonus | Yes | Announced criteria, tied to work performed |
| Shift or retention bonus tied to staying until a date | Often yes | Depends on whether it was promised as an inducement; ask HR |
| Truly discretionary surprise bonus | No | Both fact and amount decided at employer's sole discretion at the end of the period |
| Gifts not measured by hours or productivity (for example, a holiday gift) | No | Excluded when not tied to hours worked, production or efficiency |
If you cannot tell which category applies, look for signals such as a written bonus plan, an email or handbook describing the criteria, or an offer letter that mentions the bonus. If the bonus was described in advance and you could earn it by meeting a condition, assume it is nondiscretionary and verify the calculation.
The formula for a bonus in a single workweek
- Add all straight-time earnings for the workweek: hours worked times the hourly rate, plus the nondiscretionary bonus.
- Divide by total hours worked to find the regular rate.
- The employee has already been paid straight time for every hour, including overtime hours, so the overtime premium owed is one-half of the regular rate times the overtime hours.
- Add the premium to the straight-time earnings to get total pay.
Here is a worked example. An employee earns $18.00 an hour, works 48 hours and earns a $120.00 weekly attendance bonus. Straight-time earnings are 48 × $18 = $864 plus the $120 bonus, for $984. The regular rate is $984 ÷ 48 = $20.50. The overtime premium is 8 × 0.5 × $20.50 = $82.00. Total pay is $984 + $82 = $1,066.00. Without the bonus in the calculation, the premium would have been 8 × 0.5 × $18 = $72.00, which is $10.00 too little. There is a shortcut for that difference: bonus ÷ total hours × 0.5 × overtime hours, or $120 ÷ 48 × 0.5 × 8 = $10.00.
Check your own week with the Overtime Pay Calculator. The basic regular-rate method, including a one-week bonus example, is in how to calculate overtime pay.
Bonuses that cover more than one week
Many bonuses are paid monthly, quarterly or annually. The regulation at 29 CFR 778.209 requires that the bonus be attributed to the workweeks in which it was earned. If the bonus is based on work over a quarter of 13 weeks, it cannot simply be treated as income for the week in which it was paid. The employer must allocate it to the weeks it was earned and then recompute the overtime for each week in which you worked more than 40 hours. If the bonus cannot be allocated based on actual earnings, a reasonable allocation, such as equal amounts per week, is used.
Take an employee who receives a $1,300 quarterly bonus for 13 weeks, which allocates to $100 per week. In three of those weeks the employee worked overtime. The additional overtime owed on the bonus for each of these weeks is the bonus divided by hours worked, times 0.5, times the overtime hours.
Additional overtime due on a $100 weekly allocation of a quarterly bonus
| Week | Total hours | Overtime hours | Calculation | Additional pay due |
|---|---|---|---|---|
| Week 3 | 44 | 4 | $100 ÷ 44 × 0.5 × 4 | $4.55 |
| Week 7 | 46 | 6 | $100 ÷ 46 × 0.5 × 6 | $6.52 |
| Week 11 | 50 | 10 | $100 ÷ 50 × 0.5 × 10 | $10.00 |
| Total | 20 | $21.07 |
The additional pay must be paid as soon as the bonus amount can be determined, which usually means with or shortly after the bonus payment. It is common for an employer to pay the bonus and forget the retroactive overtime true-up, so an employee who works overtime and receives a periodic bonus should look for it on the next paycheck. See how to read a pay stub for how to find the bonus and overtime lines.
Bonuses and employees with two pay rates
If you work two jobs for the same employer at different rates and also receive a bonus, the bonus is added to the straight-time earnings from both jobs before dividing by total hours. Read overtime with two jobs for the weighted-average method.
Bonuses that do not belong in the regular rate
The statute lists several kinds of payments that may be left out of the regular rate, including truly discretionary bonuses, certain gifts, payments for time not worked such as holiday or vacation pay, and expense reimbursements. Paid holiday time is not counted toward the 40 hours either; see is holiday pay required.
What to do if your bonus overtime is missing
- Gather proof that the bonus was promised or announced: a plan, email, handbook or offer letter.
- Record your hours for the weeks covered, using the Weekly Time Card Calculator.
- Calculate the additional pay with the bonus formula above and compare it with your pay stubs.
- Send payroll a written, specific request that lists the weeks, hours and amounts.
- If it is not resolved, contact the Wage and Hour Division or your state labor agency.
Frequently Asked Questions
Does a bonus count as part of my regular rate for overtime?
A nondiscretionary bonus, one promised or announced in advance for meeting a condition, is part of the regular rate. A truly discretionary bonus is not.
What makes a bonus discretionary?
Both the fact of payment and the amount must be at the employer's sole discretion, decided at or near the end of the period, and not under any prior promise or agreement that leads the employee to expect it.
How do I calculate overtime with a bonus?
Add straight-time earnings and the bonus, divide by total hours to get the regular rate, then pay one-half of that rate for each overtime hour on top of straight time already paid.
How are quarterly or annual bonuses handled for overtime?
The bonus is attributed to the workweeks in which it was earned, and overtime is recalculated for each of those weeks in which more than 40 hours were worked.
Do exempt employees get overtime on bonuses?
No. Employees who are properly exempt are not entitled to overtime, so a bonus does not change their overtime pay.
Are holiday gifts included in the regular rate?
Gifts that are not measured by hours, production or efficiency are generally excluded from the regular rate.
Related tools & guides
This guide is for general informational purposes only and is not legal, tax, or financial advice. Labor laws vary by state and change over time. Confirm your specific situation with your employer, HR department, or the U.S. Department of Labor.