On May 26, the U.S. Department of Labor (DOL) issued a final rule under the Fair Labor Standards Act (FLSA) expressly authorizing employers to offer bonuses, hazard pay and other premiums to employees whose hours and regular rate of pay vary from week to week.
The final rule revises 29 CFR §778.114, which is the DOL regulation that specifies how overtime is to be computed for salaried, nonexempt employees who work a fluctuating workweek. The new rule clarifies that bonuses, premium payments, commissions and hazard pay on top of fixed salaries are compatible with the fluctuating workweek method of compensation and that employers must include such variable compensation when calculating an employee’s regular rate for overtime purposes. The final rule includes example calculations to illustrate how to factor in such payments.
The DOL’s issuance of this new final rule resolves the ambiguity over whether the payment of additional bonus and premium payments to employees who work a fluctuating workweek is permissible under the FLSA.