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 due for a period in which employees earn a flat sum bonus, 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.