Q: If I make $30 an hour, plus a bonus of 20% of my annual income ($12,480) if I hit my performance goals, what should I be paid when I work overtime? The company is paying $45 an hour as my overtime rate.
A. If you are an hourly employee who is paid non-discretionary bonus that is tied to performance, the value of that bonus has to be including in the computations of your "regular rate of pay" for overtime purposes. The wage orders provide that the overtime rate must be "one and one-half (1 1/2) times such employee’s regular rate of pay". Your "regular rate" is the compensation you normally earn for the work you perform. The regular rate of pay includes a number of different kinds of remuneration, such as hourly earnings, salary, piecework earnings, and commissions.
Your bonus is included in the regular rate of pay for purposes of calculating overtime if it is a nondiscretionary bonus. A nondiscretionary bonus is included in determining the regular rate of pay for computing overtime when it is based upon hours worked, production or proficiency. Discretionary bonuses or sums paid as gifts at a holiday or other special occasions, such as a reward 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.
In your case, the bonus is a nondiscretionary bonus measured by or dependent upon hours worked, production or efficiency. Therefore, if you hit those goals, that bonus must be included in your regular rate of pay. Adding that bonus to your base hourly rate, you have a regular rate of pay that comes to $36 per hour. Your overtime rate should be $54 per hour.