Bonus Pay in California for Non-Exempt Employees | Mann & Elias
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Bonus Pay in California for Non-Exempt Employees

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Most companies know the value of their employees. They do what is necessary to develop and retain their talent. Bonuses are among the many rewards that businesses use to motivate employees, show their appreciation for their work, and boost team morale. A bonus is a payment that is outside the normal salary. It is something added to the latter. Bonuses are nevertheless regulated by the state of California’s wage and hour laws. You should know how these regulations apply to any bonus system you have established. Your employees must also be aware of how bonuses impact their tax and wage-hour calculations.

You should retain the services of an employment attorney in Los Angeles if you are thinking about giving your employees bonuses as part of a larger incentive system. If you are a small business going through a time of prosperity and can afford to award bonuses, you should do so. To avoid disputes and misunderstandings with recipients, you need to design the system following the law.

Bonuses Earned and Unearned

How you design your bonus system will depend on many factors, including the financial soundness of your company and your objective in awarding them.

Bonuses can get earned and unearned. An earned bonus requires an employee to meet some set criteria, which can be a certain number of hours worked in a year, new business brought in, or their contribution to the company’s profit.

An unearned bonus also called a discretionary bonus, is given for no reason other than the employee’s loyalty and good service. It can also be a way to show your appreciation for what your employees have done.

No matter the kind of bonus you give, it will still be considered a wage under the California Labor Code. That means it must get paid in a timely way—that is, on the payday that applies to the pay period—all bonuses, whether cash or non-cash, must be taxed according to their value.

How Bonuses Affect Overtime Calculations

If your employees work overtime and receive a bonus, the latter must be included in the former. The California Department of Labor Standards and Enforcement has set out guidelines that describe calculating overtime bonus pay. You must discern the amount of overtime worked per regularly scheduled hours. This must then be multiplied by 1.5 to get the total amount of overtime bonus pay.

Discretionary Bonuses

California labor law defines a discretionary bonus as “sums paid as gifts on holidays or other special occasions. That includes rewards for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay.”

It is important to get this right. You must ensure that your bonus system operates per the law. Here are some general pointers to help you determine if the bonuses you award are earned or discretionary:

  • Discretionary bonuses cannot be dependent on hours worked, productivity, or any other measurable criteria
  • Discretionary bonuses cannot be so large that employees consider it a wage or part of a wage
  • If you award money for the holidays, it is considered discretionary
  • If you award money to employees who have made good suggestions or come up with good ideas, it can be considered discretionary only if it was not part of some general program in which employees were required to participate

If you think of implementing a bonus payment plan, an employee commission plan, or giving end-of-year discretionary bonuses, you should consult with a qualified attorney. You want to enhance productivity and boost the morale of your workforce. These are all laudable goals and will be good for your business. Establishing a bonus system may help you achieve them, but the system must be constructed and run according to California wage and hour laws.

If You Are an Employee Who Has Not Received an Owed Bonus

If you were promised a bonus and have not yet received your money, then you may need to take legal action against your employer. It may not have received your money because of an honest mistake or oversight. It would be best if you always tried to reason with your employer before taking the matter further. If you have exhausted this approach, then you may need to sue for unpaid bonuses.

Avoid fighting this battle alone. Our Los Angeles lawyers for bonus pay have handled many cases like yours. Our trusted legal professionals make it their mission and aim to help ordinary people who have been mistreated and cheated by their employers. Dealing with a company to get the money owed to you can be incredibly stressful. Legal counsel can provide you with the insight and representation you require if you need to sue for unpaid bonuses.

Your lawyer will first sit down with you and ask you to recall the circumstances surrounding your participation in the bonus scheme. You should turn over any documentation, emails, and text messages related to the topic. If necessary, they will issue a subpoena for company records that describe and explain the bonus system and may contain evidence of your participation in it.

The most common defense of companies trying to cheat employees out of their bonus pay is to claim that the latter did not meet the criteria. If you did meet the requirements to receive your bonus, your lawyer would gather the evidence that proves it. It may require speaking to your work colleagues, sifting through company documents, and interviewing administrative staff involved with the matter.

The main aim of employment attorneys for bonus disputes is to get you the money you deserve. Suppose the company unjustly denied you the bonus and put you through an unnecessary period of stress and strain. In that case, you may be able to sue them for emotional distress in addition to the bonus money.

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