Navigating the “Bonus” Problem

The Department of Labor Wage and Hour Division has, from time to time, been fairly active in the cotton ginning industry. While a few gins have had visits this year in our region, other parts of the cotton belt haven’t been quite as lucky. One of the things that ginners tend to get hung on is bonuses.

We tend to incentivize our seasonal help with a periodic bonus (annual, or monthly etc.). While promising a bonus of some set amount sounds good and simple, many folks forget that bonuses impact the employee’s “base rate of pay” and is subject to overtime. While OSHA is really frowning on ‘safety bonuses’, a bonus for staying the season or rewarding a shift making production goals is still a motivator to a lot of employees.

A recent article on Fisher and Phillips’ website helps employers navigate the issues that are associated with such bonuses. The article entitled What is a ‘Percentage Bonus'” details a number of ways to get around the sticky problem of calculating overtime when giving a bonus.

In the past, when asked, we recommend the use of a percentage bonus. Instead of promising someone a set amount tell them you’ll give them a percentage of their gross pay. When you do this you will automatically account for the overtime. The concept of a bonus pool. I’m not going into the details in my post but I highly recommend you taking a few minutes to read the article. This plus the information contained in our Employment Guide For Ginners answer a lot questions about overtime, payroll, bonuses and housing for our industry. Don’t hesitate to contact us with questions.