[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR778.209]

[Page 418-419]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 778_OVERTIME COMPENSATION--Table of Contents
 
    Subpart C_Payments That May Be Excluded From the ``Regular Rate''
 
Sec. 778.209  Method of inclusion of bonus in regular rate.

    (a) General rules. Where a bonus payment is considered a part of the 
regular rate at which an employee is employed, it must be included in 
computing his regular hourly rate of pay and overtime compensation. No 
difficulty arises in computing overtime compensation if the bonus covers 
only one weekly pay

[[Page 419]]

period. The amount of the bonus is merely added to the other earnings of 
the employee (except statutory exclusions) and the total divided by 
total hours worked. Under many bonus plans, however, calculations of the 
bonus may necessarily be deferred over a period of time longer than a 
workweek. In such a case the employer may disregard the bonus in 
computing the regular hourly rate until such time as the amount of the 
bonus can be ascertained. Until that is done he may pay compensation for 
overtime at one and one-half times the hourly rate paid by the employee, 
exclusive of the bonus. When the amount of the bonus can be ascertained, 
it must be apportioned back over the workweeks of the period during 
which it may be said to have been earned. The employee must then receive 
an additional amount of compensation for each workweek that he worked 
overtime during the period equal to one-half of the hourly rate of pay 
allocable to the bonus for that week multiplied by the number of 
statutory overtime hours worked during the week.
    (b) Allocation of bonus where bonus earnings cannot be identified 
with particular workweeks. If it is impossible to allocate the bonus 
among the workweeks of the period in proportion to the amount of the 
bonus actually earned each week, some other reasonable and equitable 
method of allocation must be adopted. For example, it may be reasonable 
and equitable to assume that the employee earned an equal amount of 
bonus each week of the period to which the bonus relates, and if the 
facts support this assumption additional compensation for each overtime 
week of the period may be computed and paid in an amount equal to one-
half of the average hourly increase in pay resulting from bonus 
allocated to the week, multiplied by the number of statutory overtime 
hours worked in that week. Or, if there are facts which make it 
inappropriate to assume equal bonus earnings for each workweek, it may 
be reasonable and equitable to assume that the employee earned an equal 
amount of bonus each hour of the pay period and the resultant hourly 
increase may be determined by dividing the total bonus by the number of 
hours worked by the employee during the period for which it is paid. The 
additional compensation due for the overtime workweeks in the period may 
then be computed by multiplying the total number of statutory overtime 
hours worked in each such workweek during the period by one-half this 
hourly increase.