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Exploring Overtime Expansion: Commissions and Bonuses

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This blog is part of an ongoing series that answers questions most frequently asked during Paycom’s free webinar covering overtime expansion.

All right, so maybe it’s not that complicated. But, if you’re planning to implement a pay structure that includes bonuses and commissions – or if you already have one – it’s important to understand how the Fair Labor Standards Act’s (FLSA) updated overtime rule may impact it.

A tale of two terms

When it comes to remuneration that’s given in addition to employees’ regular pay rates, the U.S. Department of Labor maintains that most payments can be classified as either discretionary or non-discretionary bonuses.1

Discretionary bonuses are given at the discretion of the employer and are not expected by the employee. On the other hand, non-discretionary bonuses are designed to incentivize and are expected by employees if predetermined criteria are met. Commissions typically fall into the non-discretionary category.

Changes for white-collar employees

Previously, neither discretionary nor non-discretionary bonuses generally could be included toward satisfying the standard salary threshold. But now, employers are permitted to satisfy up to 10 percent of the standard salary requirement with non-discretionary bonuses, incentive payments and commissions, provided these forms of compensation are no less frequently than quarterly.2

It’s important to note that the percentage amount is derived from the new standard salary threshold. In other words, no more than the equivalent of $91.30 per week ($913 x 10%), or $4,747 annually, can apply toward meeting the standard salary threshold.3

For example, Beth is a store manager who makes a base salary of $865 per week ($44,980 per year). Last quarter, she earned the equivalent of $192 per week in performance-related bonuses. Of that bonus, only the equivalent of $91.30 per week is allowed to be used to push Beth’s weekly salary above the new threshold. Under this scenario, Beth likely meets the standard salary level requirement for exemption, because her $865 base weekly salary plus $91.30 of allowable non-discretionary bonus totals $956.30, which exceeds the $913 required minimum under the rule.

As another example, Jason is an assistant manager in the same store. He makes a base salary of $730 per week ($37,960 per year). Last quarter, he received the same performance-related bonus of $192 per week. While this bonus would push his weekly earnings to the equivalent of $922 – which is above the standard salary threshold – his employer is limited to using only $91.30 of nondiscretionary bonus toward the total weekly salary requirement; his $192 weekly bonus exceeds the 10 percent requirement. Adding the maximum allowable $91.30 per week to Jason’s weekly pay rate of $730 totals just $821.30, less than the weekly threshold requirement of $913. Therefore, under this scenario, Jason does not meet the standard salary level requirement for exemption.

A slippery slope

It’s easy to see how this could cause concern for employers. Nondiscretionary bonuses are the only type of bonuses that can count toward satisfying the standard salary threshold, meaning individual employees’ performance potentially could cause them to slip in and out of exempt status.

Enter the new, quarterly catch-up payment. According to the rule, if at the end of the quarter, the sum of the salary paid plus the nondiscretionary bonuses and incentive payments paid does not equal the standard salary level for 13 weeks, the employer has one pay period to correct the shortfall.4 An employer has the option to pay the employee a lump sum to raise an employee’s earnings for the quarter equal to the standard salary level. If an employer chooses not to do this, an employee would be entitled to additional compensation for any overtime hours worked in the relevant quarter.

Highly compensated employees

While things have changed for employees under the standard exemptions, the rules surrounding how non-discretionary bonuses apply to highly compensated employees largely are the same:

  • Non-discretionary bonuses, commissions and other incentive pay can apply toward calculating total annual compensation.
  • Non-discretionary bonuses, commissions and other incentive pay cannot apply toward the standard salary requirement.5
  • Catch-up payments for highly compensated employees can occur on an annual basis.6

Inside and outside sales employees

The final rule also doesn’t change how the FLSA applies to employees who meet the outside sales exemption or the Section 7(i) retail exemption.7 For more information on these exemptions, check out this Paycom Blog post.

Ultimately, the rules surrounding nondiscretionary bonuses can be complicated, and are often case-specific. Consulting legal counsel is your best bet to ensure pay structures that include bonuses and commissions are in compliance with the FLSA.

For additional information on overtime expansion and how it may impact your organization, stay tuned to the Paycom Blog. For additional resources, check out the Paycom Overtime Expansion Calculator or attend our free webinar.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only. It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.


Amy Double

by Amy Double


Author Bio:

Amy, a tenured professional in sales and marketing with over 10 years of experience, is dedicated to creating content focused on helping organizations achieve their business goals. As an experienced writer, Amy is committed to researching and blogging about topics that affect businesses across multiple industries, including manufacturing, hospitality and more. Outside of work, Amy enjoys reading, entertaining and spending time with family.

4 Ways to Prevent Sexual Harassment

4 Ways to Prevent Sexual Harassment in the Workplace

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Online searches of the term “sexual harassment” in recent months are not only up, but way up: ever-changing, but approximately more than 500%, per a Google Trends report. For HR and business leaders, this startling increase indicates your people seek answers.

The recent surge in internet searches not only highlights the current tidal wave of harassment scandals, but also calls into question the effectiveness of today’s anti-harassment training. The U.S. Equal Employment Opportunity Commission (EEOC) has long cited training as a critical component to prevention, yet the number of EEOC charges over the years remains largely unchanged.

Get Your Workforce ‘On Course’ with Paycom Learning

It’s easy to surmise this number should be decreasing if training is effective, but it’s not that simple. Anti-harassment training is just one step to creating a safe workplace culture.

Why you need more than training

In a recent Saturday Night Live sketch, cast member Cecily Strong played a frantic HR representative quizzing an employee about anti-harassment dos and don’ts. “There’s no wrong answer,” she said, “just super-wrong answers.”

It’s a comical, but realistic take on how some companies use anti-harassment training as a cure-all. While training is one step in the right direction toward prevention, it’s time companies offer a full solution.

The EEOC’s own task force emphasizes training as an essential component: “However, to be effective in stopping harassment, such training cannot stand alone but rather must be part of a holistic effort undertaken by the employer.”

Steps toward prevention

Here are four steps to creating a culture sincere about preventing harassment, based on EEOC practices:

One: Set the bar. Make it known your business has a zero-tolerance policy for inappropriate workplace behavior. Your expectations must apply to all levels of the organization, without exception.

Two: Create a written policy. Don’t stop at defining unacceptable behavior; include the proper way to report it. Ensure whoever handles these complaints can remain neutral and has the appropriate knowledge and authority to investigate and resolve complaints. Allocate appropriate resources to address and resolve any anti-harassment claims, and stick to your policies.

Three: Train all levels of your organization, from senior leaders to entry-level employees, on what constitutes discrimination and harassment, and your process for reporting. Ensure you have different trainings for employees and supervisors. Training should be relevant and engaging to your workforce. Say goodbye to plugging in the DVD player; invest in interactive training that includes knowledge checks and nuanced scenarios, as opposed to an outdated video highlighting only overt behavior.

Four: Communicate your expectations early in the employee onboarding process and throughout their employment. Use HR technology that allows for insight into the last time an employee reviewed your training or policies. Take advantage of auto-enrollment rules to ensure policies and trainings are reviewed by everyone annually.

Keep in mind, there is no surefire way to eliminate harassment or discrimination. For example, as a society, we’ve long enacted laws against criminal behavior, but we’re not naive enough to believe simply having those laws will eliminate crime altogether; it’s a way to communicate and clearly enforce expectations.

The goal of your policies, training and processes should be similar: Emphasize what’s not acceptable behavior, encourage reporting and build confidence with your workforce that you will investigate every complaint, so you may bring them all to an appropriate resolution.

For more information, check out Sexual Harassment: Making the Workplace Safe for Everyone, our post about how organizations can learn from the Harvey Weinstein effect.

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Posted in Blog, Compliance, Featured

Rachel Hittle

by Rachel Hittle


Author Bio:

Rachel Hittle oversees a team of content creators in Paycom’s learning and development department. Together, they design e-learning courses relevant to today’s employees on topics ranging from compliance to leadership. A highlight of her career was designing and implementing the company’s first client certification program. Prior to joining Paycom, the University of Kansas journalism graduate worked as a television news reporter.

Seasonal Workforce

3 Steps to Retaining a Talented Seasonal Workforce

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We’ve now reached the busiest time of year for many employers – even if you’re not in the retail industry. And your seasonal employees might be an important asset long after the holiday rush.

Thanks to the lowest unemployment rate in 16 years and the rising gig economy, this past year has proven especially challenging for employers searching for the right talent. Identifying and hiring new employees is growing more difficult and expensive, so what can your organization do to retain the top performers of your temporary seasonal workforce for next year’s needs?

In episode 25 of the HR Break Room podcast, we met with Science Museum Oklahoma’s guest relations director, Melody Muniz, and the vice president of programs, Clint Stone, to learn how they successfully identify and retain the top performers from their seasonal workforce.

Here are the three main takeaways from our discussion.

1. Identify top performers today

To prepare for future busy seasons, identify the seasonal employees who currently shine with your customer base. Make sure you’re on their radar six months to a year in advance; during the offboarding process, ensure that managers communicate to top performers that they are welcome to return for the next peak season.

2. Foster a culture that inspires returning employees

Muniz and Stone discussed how their museum’s culture inspires those seasonal employees to return year after year. Many of their top-performing employees were frequent museum visitors years before they were old enough to join the workforce. Because of their fond childhood memories, they now bring their passion for the museum’s mission to work with them.

Science Museum Oklahoma leaders strive to put the mission first – one of dedication to learning and discovery – when making decisions that may impact its workforce. Its culture is dedicated to learning and discovery. For example, before the museum opens each morning, all employees are invited to participate in daily fun and educational activities that provide growth opportunities. More than merely wanting to hire a seasonal workforce, this organization also wishes to inspire the wonder and relevance of science in each employee – no matter how long they may remain on the payroll.

This gives the museum a competitive advantage over other seasonal employers. Consider how your unique culture can inspire your seasonal employees.

3. Use technology to stay in touch

Science Museum Oklahoma is able to retain many of its best seasonal employees by using tech to keep in touch. According to Muniz, messenger apps, email and multiple social media platforms play an important role in staying connected with seasonal talent throughout the year. Your existing seasonal employees can help you reach future employees with similar availability. For example, when implementing a retention strategy for high school and college-aged talent, reach out to gauge their interest in returning a few months before seasonal breaks and major holidays. That can help you identify how early to post open positions.

With the holidays now upon us, this is a great time to build and implement a seasonal employee retention strategy for future peak seasons. Start today by ensuring that your best ones aren’t walking out the door before you make them an offer to return.

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Posted in Blog, Featured, Hospitality, Millennials, Restaurant, Retail, Talent Acquisition, Talent Management

caleb.masters

by Caleb Masters


Author Bio:

Caleb is the host of The HR Break Room and a Webinar and Podcast Producer at Paycom. With more than 5 years of experience as a published online writer and content producer, Caleb has produced dozens of podcasts and videos for multiple industries both local and online. Caleb continues to assist organizations creatively communicate their ideas and messages through researched talks, blog posts and new media. Outside of work, Caleb enjoys running, discussing movies and trying new local restaurants.

Potential

Are You as Good Today as You’ll Ever Be?

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Will today be as good as your life ever gets?

Let’s pretend I’m an all-knowing being – which I most certainly am not – and that I visited you with an announcement: today, you’re as good as you’ll ever be. You’ll never be any better than you are right now.

Pursuing Your Leadership Potential: How the Best Can Be Better

Tomorrow won’t be terrible, but you will be a little less happy, a little less healthy, make somewhat less money, have shallower experiences and make a smaller impact. And that will continue each day for the rest of your life.

Would you be happy hearing that?

I am very confident that most people would say no.

At some level, we all hope and expect our lives will keep getting better… but what do we do each day to ensure that happens?

Ongoing improvement requires both desire and discipline. You need a passion and a plan.

That’s why I wrote, The Potential Principle: A Proven System for Narrowing the Gap Between How Good You Are and How Good You Could Be.

I’ve been fortunate to work with some of the best companies and highest performers of our day. I noticed that many had succeeded at becoming the best in their space, but once they did, they faced a greater challenge: how to become even better.

When you’re at the top of your game, improvements are more incremental and harder fought. You have few exemplars, if any, to emulate. You are the leader now, and just maintaining (not to mention increasing) that lead grows more and more difficult.

 So Why Get Better?

If you are already among the best, why bother getting any better?

First, consider this: We all know how good we’ve become, but none of us know who good we could be.

No person or organization I’ve worked with has ever claimed they were living or doing business at peak potential. Why? We simply don’t know what is possible, so we keep aiming to get better and find out just how good we could be. That makes life and business incredibly interesting. There are also several practical factors driving the need to improve.

The first is change: with so much change occurring around us, we need to improve our knowledge and skills just to keep up.

The second is competition. If our competitors get better and we don’t, we lose ground.

The third is customers. They have increasing expectations. Ever noticed that the more you do for customers, the more they expect? That’s why you need to continue to increase your value proposition.

Finally, your capabilities are above whatever level you are performing at now. As a client once told me, we don’t benchmark against our competitors, we benchmark against our capabilities.

The Key to Being Better

Nobody gets better “accidentally.” Only wine improves with age without trying. You don’t accidentally improve significantly. And you can’t reach the highest summits of your potential or make the greatest positive impact without intentionality.

How much do you want to get better? Teachers can teach you, coaches can coach you, and motivational speakers can pump you up but it is what you do with the information that matters.

Ongoing improvement requires a process, and it’s based on correctly, consistently applied principles. The exciting thing is, when you take intentional action, the door to your future swings wide open. Your willingness to work at self-improvement is the secret to realizing your full potential.

You supply the commitment to getting better, coupled with the right plan and process, and your effort will start to pay off. It’s well worth it.

Not only will it benefit you, but it will also benefit the people around you. Your customers will be happier. Your boss will be impressed. And your family will see you at your best – the spouse and parent you really want to be.

So, you have a choice to make. Are you content coasting along, content with the status quo? Or are you ready to make your best even better?

The Map of Your Potential

You may not yet know just how good you can be. But I have a tool you can use to make sure you’re moving in the right direction.

I call it the Potential Matrix. This grid identifies four aspects of life that are crucial to your journey toward improvement: the performing quadrant, the learning quadrant, the thinking quadrant, and the reflecting quadrant. Each represents potential areas of growth, and they all complement each other. Growth in one area can be used to foster growth in the others, leading to greater progress overall.


How can you best use this Potential Matrix? Begin by deciding what you want to improve: a project, a performance, a relationship – anything that really matters to you. Then use all four quadrants to help you get there.

One of the most common uses of the matrix (and the most helpful) is to start in the thinking quadrant. Determine what needs to be done and move into the learning quadrant to learn the needed skills. Then you apply those skills in the performing quadrant and afterwards reflect on the insights you gained.

Then you can go back into the thinking quadrant to rethink for even more improvement.

We all have one “preferred zone” where we are most comfortable and enjoy operating, often to the exclusion of the other zones. If you really want to be the best you can be, you’ll have to go exploring outside your comfort zone. It’s in those uncomfortable areas where you’ll grow the most.

Maybe you’re more at home in the inner world of thoughts and ideas than in the outer world of words and action. That can be awesome, but there’s a danger that you might think a lot without doing much. Or maybe the opposite is true, and you like being highly productive. Again, that’s great, but you might be doing a lot without thinking much!

This lesson is an important one: focus on improving within all four quadrants of the Potential Matrix.

Success with Significance

Your purpose is essential to pursuing your potential. If you want to be everything you can be, you need a compelling reason. That’s your purpose. It takes a strong why to power the what and the how of personal growth.

D. L. Moody said that our greatest concern in life should be to succeed in something that really matters. One of the best ways to do this, and move closer to realizing your true potential, is this: Look for the inherent meaning in your work, and infuse your existing work with meaning.

When you commit to something bigger than yourself, you’ll often find your bigger purpose. Remind yourself every day of how your role as an employee or an entrepreneur contributes to the purpose of your company, and of the impact you have on customers. When you make your best even better, you also have more to give your family and community.

Remember that you have a positive impact on others through your performance. It isn’t just the job that you have but also how you do that job that makes the difference between average and extraordinary. Resolving a customer’s complaint gracefully, delivering a knockout sales presentation or going above and beyond as a parent or spouse gives purpose and meaning to your efforts.

What matters most to you? What gets you out of bed each morning, excited and ready to face the new day? Where do you enjoy spending your time, energy and heart?

As a person of faith, I believe we all have a purpose in life. Find yours. Discover the meaning in what you do. Then give it everything you’ve got, using the tips I’ve shared in this blog and the guidance and encouragement I offer in The Potential Principle. Not only will you find success in bettering your best, but your success will matter—both to yourself and to the people around you.

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Posted in Blog, Featured, Leadership

Mark Sanborn

by Mark Sanborn


Author Bio:

Leadership expert Mark Sanborn is the author of eight books, including the 2004 best-seller The Fred Factor: How Passion in Your Work and Life Can Turn the Ordinary Into the Extraordinary and 2017’s The Potential Principle: A Proven System for Closing the Gap Between How Good You Are and How Good You Could Be. A member of the Speaker Hall of Fame, he is a winner of the Cavett Award, the National Speakers Association’s highest honor. Sanborn is also a member of the exclusive Speakers Roundtable, made up of 20 of the top speakers in America.

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