The Look-Back Period for Non-Discretionary Bonuses

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California’s overtime rules for non-exempt employees are known by virtually every employer in the state. Less known—but no less equally true—is that a non-discretionary bonus that a non-exempt employee receives must be factored into the employee’s “regular rate of pay” when determining overtime pay for a non-exempt employee. And this, in turn, requires employers to allocate a non-discretionary bonus over the time period in which the bonus was earned (i.e., the bonus’s “look back” or “measurement period”).

“Huh?”, you say.

Let’s break the above statement into bite-size pieces:

  • Non-discretionary bonus: A non-discretionary bonus is one that an employer has promised to an employee. This promise may be explicit or implied. Classic examples of non-discretionary bonuses include productivity bonuses where an employer promises to pay an employee a little extra for exceeding pre-set benchmarks.
  • Non-exempt employee: A non-exempt employee is any employee who is not exempt (hence the term “non-exempt”) from overtime protections under California or federal law. Typically, non-exempt employees are not salaried and are paid by the hour.
  • Factored into the employee’s regular rate of pay: This one is tricky and whole volumes can be written on this topic. But for our purposes, this simply means that a bonus must be allocated over the time period in which was earned when determining the employee’s overtime pay rate. And, you ask, when was a bonus earned?

    The answer is that it depends on how you structure your bonus (the earning period is not pre-defined by law). For instance, if a bonus is structured so that it is deemed to be earned monthly, the bonus would have to be allocated over a one-month period. Similarly, if an employer structures a bonus so that it is deemed on a weekly basis, that bonus would be allocated over a one-week period. While we’ll spare you the gory details of how to allocate a bonus, the key point is that your bonus structure setup is key in this allocation calculation.

For more information about non-discretionary bonuses, please contact us at

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.