The most important thing to remember about non-discretionary bonuses is that when issued to a non-exempt employee, they must be included in the employee’s regular rate of pay when calculating overtime.
A discretionary bonus, as its name implies, is a bonus in which the employer has discretion as to whether to pay it and what amount it will be. In other words, there’s no promise or agreement that a discretionary bonus will be paid. A surprise holiday bonus is one example.
A non-discretionary bonus, on the other hand, is a promised bonus that the employee expects to receive if certain conditions are met. Non-discretionary bonuses include individual or group production bonuses, bonuses for quality and accuracy of work, retention bonuses, and attendance bonuses. These bonuses are typically used to motivate employees.
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