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How to Calculate Hourly Rates for Bonuses

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Under federal law, your employer must count non-discretionary bonuses in your regular hourly rate. Non-discretionary bonuses -- such as retention, attendance and production bonuses -- are intended to encourage employees to work harder or to stay with the company. When determining your hourly rate for a bonus, consider the type of bonus.

Bonus Types

Discretionary bonuses are given at the sole discretion of the employer, typically without advance notice to the employee. These bonuses are not based on any previous agreement, contract or promise and should not be included in your regular hourly rate. For example, a bonus paid as a gift on special occasions such as Christmas, is discretionary and should not be included in your regular rate of pay. A non-discretionary bonus, however, is a form of incentive pay. From the outset, the employer sets specific standards that the employee must meet to receive the bonus.

Straight-Time Wages

Your straight-time pay is your compensation calculated at your regular hourly rate and does not include overtime pay. If you do not work overtime, figuring your hourly rate for a non-discretionary bonus is straightforward. Simply multiply your regular hourly rate by your work hours. Add the bonus to the total then divide the result by your work hours. For example, as an employee paid weekly, you earn $12 per hour, work 40 hours week and receive an attendance bonus of $50. Multiply 40 times $12 to get $480. Add the bonus of $50 to $480 to get $530. Divide $530 by 40 to arrive at your hourly rate of $13.25.

Overtime

If you work overtime, calculating your hourly rate can get tricky. Overtime is paid at 1.5 times your regular hourly rate; however, if you receive a non-discretionary bonus, you must first figure your straight-time wages then calculate overtime. For example, you work 48 hours in a particular week. Multiply 48 by your regular hourly rate of $12 to arrive at $576. Then, add your $50 bonus to $576 to get $626. Divide $626 by 48 hours to arrive at your regular hourly rate of $13.04. Since you already calculated all of your hours at your regular hourly rate, to arrive at your overtime rate, compute your regular rate by half-time. For example, $13.04 multiplied by .5 comes to $6.52. To find your overtime rate, add $13.04 to $6.52, which comes to $19.56.

Total Pay With Overtime

To determine your total pay for the pay period if you work overtime and receive a non-discretionary bonus, add your straight-time earnings and your overtime pay after factoring in your bonus. For example, 40 hours multiplied by your regular rate of $13.04 equals straight-time pay of $521.60. Eight overtime hours multiplied by your overtime rate of $19.56 comes to overtime pay of $156.48. Add $521.60 to $156.48 to arrive at total weekly wages of $678.08.

References
Writer

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

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