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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.

Transform Company Leaders Into Engagement Ambassadors

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High employee engagement is linked to higher profits, greater productivity, lower turnover rates and a slew of other positive business outcomes. For years, HR leaders have worked to establish positive protocols and cultivate constructive environments to meet the shifting needs of a changing workforce. However, new research suggests engagement responsibilities should expand from the HR department to include the C-suite.

Why diversify?

Company leaders have a huge impact on employee engagement levels. According to the 2018 Global Leadership Forecast by Development Dimensions International (DDI), “leaders continue to wield the greatest single impact on workplace engagement.” When companies work from the top down to ignite innovation and excitement in employees, everybody wins.

A 2017 Harvard Business Review article praises managers who are able to deliver profits while creating a positive work culture: “Having the ability to simultaneously drive for results and practice excellent people skills is a powerful combination that has a dramatic impact on a leader’s effectiveness.”

Below are a few high-level priorities HR can focus on to invest in their leaders so employee engagement levels may rise companywide.

Anatomy of a leader

It turns out that a good chunk of company leaders understands the importance of engagement and purpose. DDI’s study found 71% of leaders viewed their role as “a custodian of the organization’s purpose.” Also, nearly 75% of those surveyed said they supported critical activities that aligned with the company’s goals.

Although many individuals hold upper-management titles, HR leaders need to identify dynamic leaders who are not only results-driven, but also value employee engagement. A few qualities to look for include:

  • positive communicators who compel vision and set clear, strategic directions with their written and verbal communications
  • achievement-oriented individuals who create a healthy sense of urgency, trust their teams, hold people accountable and set high standards
  • relationship-minded people who build relationships slowly and systematically while keeping old relationships healthy
  • coachable individuals who can both deliver and receive critical feedback with grace

Tools for success

Once HR identifies dynamic leaders whom they can utilize as ambassadors of engagement, they can equip them with the right tools to succeed. A few tangible ways to do this include:

  • making certain leaders are exposed to realistic challenges in order to prepare them for future ups and downs
  • clearly communicating business goals, as well as the case for employee engagement in internal communications
  • having periodic, positive callouts when leaders succeed in inspiring their teams
  • setting up mentoring programs where budding leaders have built-in accountability partners and can learn coaching techniques from the best
  • selecting senior-level managers as engagement catalysts to help build a positive culture, since change starts at the top

Employee engagement isn’t just for HR. Workers who consistently see upper management communicating strategically, supporting their teams and valuing each employee’s contribution, have a successful blueprint worth following. When HR and company leaders team up with both the bottom line and an engaged workforce in mind, victory is theirs for the taking.

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Jennifer Kraszewski

by Jennifer Kraszewski


Author Bio: Jennifer Kraszewski, Paycom’s Director of Human Resources, has more than 20 years of HR leadership experience, driving transformative, business-focused human capital strategies in high-growth industries to achieve efficiencies, compliance and employee engagement. Kraszewski holds a bachelor’s degree from Baylor University and an MBA from Oklahoma City University, and is SPHR- and SHRM-SCP-certified.

HR Manager SHRM18

6 Ways to Get the Most Out of SHRM18, From One HR Manager to Another

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From Sunday, June 17, to Wednesday, June 20, the largest gathering of HR professionals in the world will unite in Chicago for the Society for Human Resource Management’s Annual Conference & Exposition, aka SHRM18. From one HR manager to another, here are my key tips to getting the most from this year’s conference … and having a little fun as well!

1. Download the conference app.

Repeat: Download the conference app. This is the absolute best source of information because it helps you plan your sessions. In addition to keeping you organized, the app includes PowerPoints and notes from each session, even the ones you missed!

2. Do not miss the general session speakers.

There is a great lineup – did someone say Sheryl Sandberg and Jeb Bush? – and these sessions are always amazing. Personally, I can’t wait to hear Adam Grant’s session. If you aren’t up to speed on Grant, an organizational psychologist, check him out on YouTube and I’ll just plan on seeing you Tuesday at his session, “Originals: How Non-Conformists Move the World.”

3. Do not miss these sessions, either.

As an HR manager, I am a steward of my organization’s culture, which is why I cannot miss Steve Browne’s Tuesday session on “Cultures That ROCK! Five Proven Ways to Develop and Sustain a Phenomenal Workplace.” I always enjoy the legislative updates and Sunday afternoon’s “Tsunami or Wave: The Washington Outlook for HR Public Policy,” from SHRM’s own Michael P. Aitken, is going to add so much value to my conference experience and compliance knowledge base.

4. Enjoy Chicago.

Deep-dish pizza, Chicago-style hot dogs and hot beef sandwiches are just the start of your Chicago experience, as architecture tours, Willis Tower, Hancock Tower, Navy Pier Park and Millennium Park await. In addition to growing your career at the conference, you’ve got to take a few moments and enjoy, in my opinion, one of America’s historical treasures, and the home of the Cubs and Michael Jordan.

5. Schedule your sessions, but be ready to improvise.

You are going to run into someone you know and miss the session you had scheduled. You’re going to get caught up in the expo hall and lose track of time. That’s OK, because you have to balance overscheduling with going with the flow.

6. Last, but not least, have fun!

We take over the city. More than 20,000 HR professionals come together for this conference and although it’s the exact opposite of how our profession can, at times, be portrayed in the movies, we know how to have a good time. Enjoy the after-hours events. Make it to the Pentatonix concert! Network with people you’ve never met. Collect swag from the expo hall and don’t forget to come by the Paycom booth (No. 250!) and visit me, as well as enter to win $5,000 toward a vacation anywhere in the U.S.!

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Chanse Moucka

by Chanse Moucka


Author Bio: Chanse joined Paycom in early 2016 focusing on Paycom’s internal HR compliance function. In addition to Paycom’s internal compliance function, Chanse also leads Paycom’s HR Business Partner team. Chanse has been in the Human Resources field for 13 years and is experienced in many aspects of HR, extensively in employee relations and compliance. Chanse holds a degree in Business Administration from Saint Gregory’s University and also holds his PHR from the Human Resources Certification Institute and a designation as a Society for Human Resource Management certified professional.

Mentorship Program

Why Your Business Needs a Mentorship Program

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It’s no secret that great leaders consistently place a high value on mentoring others. Mentors help budding leaders gain important insights, give them much-needed honest feedback and serve as a blueprint for success to their mentees. Sometimes these mutually beneficial relationships between more experienced, upper-management individuals and younger employees happen organically; other times, they may spring up by chance, through existing networks or even between supervisors and employees who just click together.

I can personally attest to the value of mentorship – in my career, spanning over 20 years, I’ve had many informal mentors. I was lucky to have great leaders who took a special interest in me and my development. Even though these relationships were not part of a formal mentorship program, they were transformative for me.

And if informal mentorship is beneficial, you can bet that formal mentorship adds value to the individuals and organizations participating. After all, formal mentoring programs can help avoid the risk of unconscious bias, and provide the structure needed to maintain the mentoring relationship even when both parties are busy. Here are a few reasons why I think they’re well worth considering.

Fruitful feedback

 You don’t have to take my word for it – compelling research from Development Dimensions International illustrates some of the key benefits of a formal mentorship program. Its 2018 Global Leadership Forecast represents the responses of more than 25,000 business leaders and 2,500 HR professionals in a range of industries. According to this study, businesses that implemented a formal mentorship program saw:

  • a 20% lower turnover rate
  • a more holistic understanding of the business from all employees
  • deeper connections and higher-quality networking opportunities
  • 46% higher quality leaders
  • an increased likelihood of wisdom remaining in-house
  • 23% more critical roles could be filled immediately
  • a silo breakdown between functional groups

A robust mentorship program is one way businesses can ensure that top talent stays, develops and thrives in-house while providing meaningful opportunities for senior execs to witness their tangible impact.

Millennials and mentorship

 The Pew Research Center recently noted that millennials are now the largest generation in the U.S. workforce. They’re not just the largest chunk of the workforce; your high-performing millennials also will be either the future leaders of your organization – or someone else’s. And one theme keeps cropping up in conversations about what millennials value: mentorship.

In fact, a 2016 Deloitte study found that millennials who planned to stay with employers for more than five years were more than twice as likely to have a mentor (68%) than not (32%). And 20-somethings aren’t the only ones who value credible feedback and wisdom – workers of all ages understand the benefits. When well-executed, mentorship programs engage your millennial employees and elevate the entire workforce.

Success stories

 Some of the world’s most financially successful organizations have a formal mentorship program, including such Fortune 500 companies as GE, Intel and AT&T.

In GE’s “leader in residence” program, top executives rotate responsibilities. During their residence time, they spend a week mentoring, teaching and coaching managers and employees. In an article for Harvard Business Review, Raghu Krishnamoorthy, GE’s vice president of executive development and chief learning officer, said, “By giving leaders access to deeper levels across the organization, and, in turn, providing participants access to senior leadership, we have created greater cohesiveness throughout the company.”

AT&T leaders mentor their workforce in topic-based groups called “leadership circles.” Within these circles, members communicate both online and face-to-face. The program allows for a single mentor to take on a few mentees at a time, but in a group setting, two or more leaders can collaborate and mentor several mentees together. The groups are self-organized, free-flowing and champion tenets such as teamwork and trust. This program suits the telecom giant’s workforce needs, and AT&T saw an increase in the quality of peer-to-peer mentoring as a result.

No matter the size or scope of your business, formal mentorship programs offer valuable insight and opportunities for both the mentor and mentee. If a rising tide lifts all boats, mentorship initiatives that make space for honest feedback and meaningful connections can ensure everyone floats a little higher.

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Author Bio: Oden-Hall is an award-winning public relations, communications and marketing professional with over 20 years experience driving corporate strategy for Fortune 500 companies. Her Oklahoma roots and passion coupled with her global experience and creative flair have helped her drive numerous successful strategic initiatives. She joined the Paycom team as Chief Marketing Officer in April of 2012.

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