The U.S. Department of Labor (DOL) recently announced a final rule that allows employers to pay bonuses or other incentive-based pay to salaried, nonexempt employees whose hours vary from week to week. The final rule clarifies that payments, in addition to the fixed salary, are compatible with the use of the fluctuating workweek method under the Fair Labor Standards Act (FLSA).
The Final Rule
The final rule allows employers to pay bonuses, shift differentials and other incentive payments to employees who are paid under the fluctuating workweek method. The final rule also establishes that supplemental payments must be included in the calculation of the regular rate, unless excluded under the FLSA.
The DOL anticipates that the final rule will grant employers greater flexibility to provide bonuses or other additional compensation to nonexempt employees whose hours vary from week to week.
Employer Takeaway
Under this method, employers can compensate employees with only half of their regular wage rate for overtime hours, as long as all of the requirements are met.
Employers should review the final ruling and consider the fluctuating workweek method as a cost-saving option to compensate employees who are not exempt from the FLSA’s overtime wage payment requirements.