Bonus Coverage: Discretionary vs. Nondiscretionary

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Many companies annually prepare business goals and establish incentives for employees if the goals are met. One common incentive is the quarterly or annual bonus. While the reward process seems straightforward, it can come with unexpected obligations and complicated calculations under the Fair Labor Standards Act (FLSA). Let’s take a closer look at exactly which bonuses must be included when you’re making the calculations.

Discretionary vs. Nondiscretionary Bonuses

Many employers view bonuses as extra payments to employees they aren’t obligated to provide. Accordingly, they don’t think about the potential FLSA implications.

When an employee works overtime in

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