The regular rate must include nondiscretionary bonuses, shift differentials, commissions, and certain incentive pay. Omitting these components understates the overtime rate for all hours worked.
Retroactive bonus allocation is required.
Alternative Names:
Regular Rate Error|Overtime Rate Miscalculation
Why it Matters?
Nondiscretionary bonus omission is the recurring error, since employers calculating overtime on base rate alone understate every overtime hour in the bonus period and must retroactively allocate the bonus across those hours. The error compounds across the workforce and the lookback period. Characterizing a bonus as discretionary requires that both the fact and amount remain at the employer's sole discretion until awarded.
Frequently Confused with
Related terms
Frequently asked questions
What is the recurring error?
What makes a bonus discretionary?
