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Bonuses

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Updated: 4/13/2007 6:36 pm
It's common practice for employers to pay their employees bonuses as a way to reward work performance or to improve company morale. A combination of company profitability, employee performance, and job position usually determine the amount of bonuses paid. Anniversary bonuses, which are given on an employee's anniversary date of employment, and December bonuses, which are paid out during the holidays, are typically the most popular form of bonuses that employees receive. To be entitled for a bonus, employees usually must be employed by the company for a certain period of time or in the month that the bonus is due and payable. Generally, unless the payment of a bonus is a term and condition of employment, and included in a contract of employment, there's no obligation on an employer to pay its employees bonuses. However, employers who choose to issue bonuses to employees should be aware of the overtime laws contained in the Fair Labor Standards Act, or FLSA (F-L-S-A). In certain instances, the FLSA requires employers to include any 'extra' pay, such as bonuses, in the base salary of employees when calculating overtime pay. The only types of bonuses excluded from an employee's overtime calculation are discretionary bonuses or gifts that aren't related to employee performance or included in an employment contract and that don't make up a substantial part of an employee's compensation. If a bonus given at the year-end holiday season or on another special occasion is a gift, it will also be excluded even though it's paid with regularity.
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