Overtime & Bonuses - Implementation

Paula_AZ

Hi,
I just started working in HR at a company that pays monthly production bonuses to hourly staff. They were not previously aware of the non-discretionary bonus/overtime issue and I've now been asked to come up with ideas as to how to implement this recalculation. They use ADP as the payroll provider, which does not have a method in place for such recalculations, so we'll have to do them ourselves. I know it can be very time consuming. Does anyone have an efficient method that works well that they'd like to share?

smaces_twin

If you pay the bonus based on their total gross wages, you already take into account their OT and you do not have to recalculate. For example if they make 1000 widgets they get 4% of their monthly gross wages. BTW, I'd calculate scrap into the equation.

This is not legal advice.

Paula_AZ

I'm sorry - maybe I wasn't clear. I'm referring to recalculating what is considered to be their "regular rate" when figuring overtime after they've earned a bonus. They earn a bonus (let's say $200) if they meet the month's production goal. They earn $10/hr and worked 200 hours during the month in which the bonus was earned. That's $2000. Add the bonus of $200 - now they've earned $2200. Divide the $2200 by the number of hours they worked (200) and their new "regular rate" is $11/hr. Any overtime they worked during the course of that month would now be at 1.5x the $11 rate. Since they've already been paid the OT at the $10 rate on their regular paycheck and bonuses are paid a month later, they are owed the OT on the difference between the two rates, in this case $1.
Clear as mud, isn't it?
What I'm looking for is an efficient way to calculate any past OT owed to the employees after the bonus is figured in.

smaces_twin

I understand that you have to relcalute their regular rate for OT purposes for certain bonus programs. I'm saying that you do not have to recalculate if you do it the way I explained. I don't have a good way to recalculate because I set up bonus systems so you don't have to. Sounds like your stuck with what you have. Sorry I can't be more help. I'm sure others will weigh in.

POPEYE

Smaces is right on going forward. Surely the ADP system will have an option that pulls out OT hours for each pay period, not $$$ but hours. If not, the only alternative I can offer is to get lots of paper, pens and batteries for your calculator.