Overview of Overtime Calculations on Flat Sum Bonus Payments

As a result of a California Supreme Court ruling in 2018, Payroll for North America updates the calculation of overtime pay amounts for periods in which employees earn flat sum bonus payments. This court ruling requires that when employers perform overtime calculations on flat sum bonus payments, they must use a regular bonus rate of pay that is determined by dividing the total compensation earned by only the non-overtime hours worked during the period to which the bonus applies. This method is different from the one that is used to perform overtime calculations on production bonus (bonus based on a percentage of production or a formula) payments, in which the regular bonus rate of pay is determined by dividing the total compensation earned by the total number of hours worked (including overtime) during the period to which the bonus applies.

Currently, this overtime calculation for flat sum bonus payments applies to the state of California only.

Existing FLSA or Alternative Overtime functionality remains unchanged.

After the FLSA or Alternative Overtime rate is calculated, the system calculates automatically any overtime pay on flat sum bonus for any employee who meets all of these conditions:

  1. The employee has an employee type of Hourly or Exception Hourly.

  2. The employee receives regular earnings. If the regular earnings are paid for multiple states, the regular hours from all states will be used in calculating the regular bonus rate, which is used in calculating any overtime amount(s) due on flat sum bonus payments in states where such overtime on flat sum bonus payment calculations are required (currently only in California).

  3. The employee has FLSA status of Nonexempt Alt Overtime.

  4. The employee receives a flat sum bonus payment for which:

    • The earnings code is specified on the Flat Sum Bonus Table page, and

    • The state to which the earnings code pertains is the same state listed on the payline (currently California only).

  5. The employee receives overtime pay for which:

    • The overtime earnings codes are mapped to overtime on flat sum bonus earnings codes on the Overtime on Flat Sum Bonus Table page, and

    • The state to which the overtime earnings code mapping pertains is the same state listed on the payline (currently California only).

Refer to the Overtime Pay Calculations on Flat Sum Bonus Payments topic for some examples on how overtime payments are calculated for periods in which employees earn flat sum bonuses.

To comply with the wage statement requirements of California Labor Code, you must enable the option to print overflow checks and advices for the PNAUSA paycheck setup on the Paycheck Options Table Page.

The Overtime on Flat Sum Bonus calculation is not supported in the Paycheck Modeler. It is recommended that Overtime on Flat Sum Bonus earnings codes be excluded from the Pay Group Parameters table in the Paycheck Modeling USA setup, so that employees cannot select any Overtime on Flat Sum Bonus earnings codes when using the Paycheck Modeler.