[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR778.209]

[Page 373-374]
 
                             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

[[Page 374]]

regular hourly rate of pay and overtime compensation. No difficulty 
arises in computing overtime compensation if the bonus covers only one 
weekly pay 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.