Paying Non-Exempt Employees at Year End

With the holiday season upon us, now is a good time to evaluate your company’s pay practices and ensure compliance with the Fair Labor Standards Act. Here are a couple of typical year-end pay practices relating to non-exempt employees to consider this holiday season.

Will your non-exempt employees work on a holiday? If non-exempt employees work on a holiday like Thanksgiving or Christmas, be sure those employees receive at least minimum wage and any applicable overtime compensation for all hours actually worked. If the non-exempt employees who must work on a holiday receive holiday premium pay, remember that the premium pay does not need to be included in the calculation of the employee’s regular rate of pay for overtime purposes so long as the premium equals at least time-and-one-half of the employee’s normal, established rate of pay for each hour worked, and the premium pay is tied to working on the specified holiday. Check the company handbook to see whether premium pay on holidays is defined.

Will your non-exempt employees receive a year-end bonus? For non-exempt employees, a bonus may or may not need to be included in the employee’s regular rate of pay. If the bonus is truly a gift given during the holidays, then it may be excluded from the employee’s regular rate of pay. But if the fact that the bonus is given or the amount of the bonus is determined based on the employee’s productivity, performance, hours of work, or similar bases, then the bonus must be included in the employee’s regular rate of pay. This inclusion will affect and increase any overtime premiums that the employee earned in the period during which the bonus was earned.

MSEC is available to assist with any compensation questions you may have during this holiday season.