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regular rate of Pay Calculation on Annual Bonus and Stock in US Payroll

Dec 13, 2016 at 03:43 AM


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I am trying to understand how Regular Rate of Pay can be calculated using standard SAP functions on benefits like Annual Bonus or Stock benefit. example - If an non exempt employee with an hourly rate of $20 gets an annual bonus of $1000 in the month of Dec 2016. Bonus earned is for the period Dec 2015 to Nov 2016 and if the employee has 100 Hours of overtime in the period Dec 2015 to Nov 2016. Does the standard RGRTE function calculate regular Rate of Pay Considering, Overtimes and Regular times from Dec 2015 to Nov 2016 or will it consider overtime from the current period i.e. Dec 2016.

I want to understand how RGRTE works on additional payments with look back period of more than 1 period in the past from the current pay period.

How RGRTE function works in the below Example from DOL site

Bonuses For purposes of calculating overtime pay, section 7(e) of the FLSA provides that non-discretionary bonuses must be included in the regular rate of pay. Non-discretionary bonuses include those that are announced to employees to encourage them to work more steadily, rapidly or efficiently, and bonuses designed to encourage employees to remain with a facility. Few bonuses are discretionary under the FLSA, allowing exclusion from the regular rate (29 CFR 778.200 and 778.208).Referral bonuses paid for recruitment of new employees are not included in the regular rate of pay if all of the following conditions are met: (1) participation is strictly voluntary; (2) recruitment efforts do not involve significant time; and (3) the activity is limited to after-hours solicitation done only among friends, relatives, neighbors and acquaintances as part of the employees’ social affairs.

In an effort to attract more nursing personnel, a skilled nursing facility’s nursing department gives hourly paid LPNs and RNs a $2,000 bonus after being employed six months. Does this bonus have to be included in the regular rate? If so, how does it need to be calculated?

Yes. The retention bonus must be included in the regular rate calculation in overtime weeks covered by the bonus period. The retention bonus described above was earned over six months or 26 weeks. The weekly equivalent is $76.92 ($2,000 ÷ 26 weeks). If an employee works overtime during the 26 week period, the increase in the regular rate is calculated by dividing $76.92 by the total hours worked during the overtime week.

In the following calculation, the $2,000 retention bonus was earned over six months or 26 weeks, for a weekly equivalent of $76.92 ($2000 ÷ 26 weeks). If the employee worked ten hours of overtime in their 9th week of employment, the employee would be due an additional $7.70 in overtime earning as follows:

$76.92 ÷ 50 hours = $1.54 (increase in the regular rate)

$1.54 x ½ = $.77 (increase in the additional half-time premium)

$ .77 x 10 hours of overtime worked = $7.70 (increase in overtime earnings due to the bonus)

Regards, ND

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