Bonus Overtime/Double Time Premium
There are two types of Non-Discretionary Bonuses defined in the State of California Department of Industrial Relation's Overtime FAQ's: Flat Sum and Production.
The methods of calculating Overtime and Double Time Premium differ between the two types of bonuses.
See Topics:
How to Enter a Bonus in a Single Pay Period
How to Enter a Bonus for an " Earning Period"
Flat Sum vs Production Bonuses Chart
Overtime Premium on Flat Sum Bonuses
Flat Sum Bonus Definition: A flat sum bonus is used as incentive, not piece or unit based (i.e. Attendance Bonuses). This bonus type is not included in standard overtime premium. It is, however, included in the regular rate of pay for R&R.
When calculating overtime in pay periods in which an employee earns a flat sum bonus, employers must divide the amount of the bonus by the non-overtime hours worked by an employee. This is because a flat sum bonus must be treated "as if it were earned on a per-hour basis throughout the relevant pay period."
In other words, employers must divide an employee's flat sum bonus by the maximum regular hours worked in the bonus-earning period, not by the total hours (hours + overtime) worked in the bonus-earning period. This calculation will produce the regular rate of pay on the flat sum bonus earnings.
Overtime on a flat sum bonus must then be paid at 1.5 times (or 2 times for double-time) this regular rate calculation for any overtime hour worked in the bonus-earning period.
(See an example below on how to calculate overtime premium on a flat sum bonus.)
Overtime Premium on Production Bonuses
Production Bonus Definition: Bonuses designed as an incentive for increased production for each hour worked. This bonus type is not included in standard overtime premium. It is, however, included in the regular rate of pay for R&R.
When calculating overtime in pay periods where an employe earns a production bonus, employers must divide the production bonus by the total hours worked. This is because overtime hours contributed to the production of the employee. This will produce the regular rate of pay on the production bonus earnings.
Overtime on a production bonus must then be paid at .5 times (or 1 time for double-time) the regular rate calculation for any overtime hour worked in the production bonus-earning period.
(See an example below on how to calculate overtime premium on a production bonus.)
Overtime Rules Setup for Bonuses
Wage types for bonuses and the overtime premium due (if needed) for a bonus need to be defined within the program. This is done under the Wage Types tab of the Overtime Rules Window (Payroll > Setup > Overtime Rules).
If you pay a bonus and have overtime on a payroll check, the bonus overtime premium is calculated separately using only the straight time hours. To accurately pay the overtime for bonuses, you will need to add specific wage types for the bonus, bonus overtime premium, and bonus double-time premium. Then, enter the wage codes here.
In the example below, wage codes for flat sum bonus (FB) and production bonus (SB) have been added and their respective overtime premium and double-time premium codes have been linked.
