Which type of bonus must be included in the regular rate of pay when calculating overtime under the Fair Labor Standards Act?

The inclusion of a bonus in the regular rate of pay when calculating overtime under the Fair Labor Standards Act hinges on the nature of that bonus. A bonus that is explicitly outlined in an employment agreement or company policy as part of the employee’s pay is considered non-discretionary. This means it is earned in relation to the employee's performance or time worked, making it an integral component of the regular rate of pay.

Non-discretionary bonuses are typically predictable and must be factored into the calculations for overtime compensation. Such bonuses might be based on production goals, tenure, or specific criteria outlined in an employment agreement. Since they are not left to the employer's discretion and are somewhat planned or expected, they become part of the regular earnings used to calculate overtime pay.

Discretionary bonuses, holiday bonuses, and gift bonuses, on the other hand, are not included in the regular rate of pay for overtime calculations because they are given at the employer's discretion and are not required or expected as a part of the regular wages. Thus, only those bonuses that are part of an employment agreement or explicitly communicated to be performance-related count toward the regular pay used for overtime calculations.