Non-Discretionary Bonus
A type of bonus known as a “non-discretionary bonus” is given to employees in exchange for their performance, length of service, or other predetermined factors. This indicates that the employer cannot withhold the bonus at their discretion because they are legally obligated to pay it. Because they are earned by the employees based on specific criteria rather than at the employer’s discretion, non-discretionary bonuses are also known as “earned bonuses.”
Annual or quarterly bonuses, sign-on bonuses, and retention bonuses are all examples of non-discretionary bonuses. The reward sum is normally founded on a recipe or pre-set standards, for example, sales targets, production goals, or participation records. Employees are frequently rewarded for their hard work and dedication by receiving non-discretionary bonuses as a form of motivation.
When it comes to non-discretionary bonuses, employers must adhere to federal and state laws. Under the Fair Labor Standards Act(FLSA), non-discretionary bonuses must be included in an employee’s regular rate of pay for overtime calculations. This implies that the reward sum should be added to the employee’s hourly rate while working out additional time pay. To avoid any ambiguity or misunderstandings, employers should also make employees aware of the bonus amount and the criteria for earning it.
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