Bonus Plans
mlpokorney
2 Posts
Would anyone care to share their bonus plans?
Currently ours is calculated off of wages that include OT. If the bonus is 4%, then it's 4% of your wages. Very cut and dry, not favortism. Everyone is calculated the same. Problem is, our exempt people do not get OT so, they may be working the same OT hours as an hourly person, however, their wages do not change.
OT has to be paid on "wages" and for legal purposes, wages includes bonus; so, if we didn't pay the bonus on wages including overtime, we would have to, at the end of the year, recalculate what peoples wages were for (inclusive of the bonus) and then go back and adjust OT payments based on their revised wage.
We are trying to come up with a new bonus plan that is fair to all employee's.
Currently ours is calculated off of wages that include OT. If the bonus is 4%, then it's 4% of your wages. Very cut and dry, not favortism. Everyone is calculated the same. Problem is, our exempt people do not get OT so, they may be working the same OT hours as an hourly person, however, their wages do not change.
OT has to be paid on "wages" and for legal purposes, wages includes bonus; so, if we didn't pay the bonus on wages including overtime, we would have to, at the end of the year, recalculate what peoples wages were for (inclusive of the bonus) and then go back and adjust OT payments based on their revised wage.
We are trying to come up with a new bonus plan that is fair to all employee's.
Comments
I'd definitely urge caution about paying "production bonuses" of flat dollar amounts if you disregard the effects on employees' overtime. If employees know how much they would receive if they "produce" at a certain level, then the bonus is not discretionary. The bonus dollars can be spread out over the performance period, but they add to the regular rate for each week of the period covered. If, on the other hand, even the production bonuses are at management's discretion, then I take it all back!
As to the original question, this is like the Democrats and Republicans arguing over taxes. What's fair is in the eye of the beholder. Assuming the exempt employees earn more than the nonexempt employees, then four percent of their pay produces an absolutely bigger bonus than the nonexempts receive. If the scales are still tilted, though, perhaps you could pay a five-percent or six-percent (or whatever) bonus to the exempts, and describe part of it as an overtime bonus. Then the bonus is both absolutely and relatively larger for exempts. You can do pretty much whatever you want to with the exempt folks.
If you figure out a fair alternative, perhaps you could pass it along to your Congressman!
Our bonus plan has differing percentage targets—the higher you are in the organization, the higher your target. The theory is that, while everyone contributes to the Company’s success, the supervisors and managers have more influence, control, and accountability for results. Therefore, they have a higher bonus opportunity. Besides that, most of our competitors provide bigger bonus opportunities to their higher-level employees, and we have to maintain competitive practices.
It has worked really well for us.