FLSA2026-6 — Whether a bonus calculated by comparing an employee’s total straight-time and overtime earnings to the total straight-time and overtime earnings of all employees eligible for the bonus is a “percentage of total earnings” bonus under 29 C.F.R. 778.210 that provides for the simultaneous payment of any overtime compensation due on the bonus, thus satisfying the FLSA’s overtime pay requirement.

U.S. Department of Labor Wage and Hour Division
Washington, D.C. 20210

1

FLSA2026-6
May 28, 2026
Dear Name*:
This letter responds to your request for an opinion concerning whether a quarterly bonus program
complies with the overtime pay requirement of the Fair Labor Standards Act (FLSA or Act).
Specifically, you ask for confirmation that the quarterly payment you describe constitutes a
“percentage of total earnings” bonus that provides for the simultaneous payment of any overtime
compensation due on the bonus or, in the alternative, for guidance addressing how to include the
bonus in each employee’s “regular rate of pay.”
It is our opinion that, under the circumstances presented, your client’s quarterly bonus provides
simultaneous payment of any overtime compensation due on the bonus, satisfying the Act’s
overtime requirement. Accordingly, when your client distributes the quarterly bonus to its
employees, it need not recompute the regular rate or pay additional overtime compensation.
BACKGROUND
You represent that your client pays a quarterly bonus to a group of “eligible employees,” at least
some of whom work overtime hours and are entitled to the requisite pay under the FLSA. At the
end of each quarter, your client determines the exact number of eligible employees and the
available bonus pool based on its sales revenue during the quarter. Your client then generates a
“gross earnings” report, which includes “both straight time and overtime compensation earned
during the quarter” by the eligible employees. Your client then determines each employee’s share
of the bonus pool by “calculating the percentage that the employee’s total gross compensation
(straight time plus overtime) represents of the total gross compensation paid to all eligible
employees for the quarter.” Finally, your client multiplies the resulting percentage by the bonus
pool amount to arrive at each employee’s quarterly bonus. For example, if the available bonus
pool is $100,000 and an employee’s total gross compensation amounted to 5 percent of the total
gross compensation paid to all eligible employees in the quarter, then the employee would receive
a $5,000 bonus, i.e., 5 percent of the $100,000 bonus pool. Your client does not provide additional
overtime pay on the quarterly bonus, as you believe the bonus constitutes a “percentage of total
earnings” bonus which provides simultaneous payment of any required overtime pay due on the
bonus, as set forth in 29 C.F.R. § 778.210.
We assume that the “straight time compensation” described in your letter refers to the straight-
time earnings used to calculate overtime under the FLSA and would not include, for example,
items such as gifts, discretionary bonuses, expense reimbursements, or employer contributions to
employee benefit plans that are excluded from the “regular rate” used to calculate overtime. See
29 U.S.C. § 207(e). Relatedly, we also assume that the term “overtime compensation” means
overtime pay equal to that which is required by the Act based on an employee’s pre-bonus
earnings, and that “gross” compensation means the amount is not subject to further adjustments
(whether through payroll deduction or otherwise) other than corrections for prior workweeks or

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limited deductions that are permitted to cut into FLSA-protected wages. See 29 C.F.R. §§ 531.38–
.40 (recognizing that deductions for items such as taxes, required wage garnishments, employee
charitable donations, employee union dues, or employee insurance premiums are equivalent to a
payment to the employee). Finally, we presume that, when preparing the quarterly reports and
making the computations to determine the quarterly bonuses due, whatever method your client
utilizes for aligning the workweek—whether a rolling 13-week or 3-calendar-month period—is
applied evenly and consistently each quarter.
GENERAL LEGAL PRINCIPLES
The FLSA requires that employers pay non-exempt employees at least the federal minimum wage
for all hours worked and overtime compensation “at a rate not less than one and one-half times the
regular rate at which [the employee] is employed” for all hours worked over 40 hours in a
workweek. 29 U.S.C. §§ 206(a), 207(a)(1). An employee’s “regular rate” for determining any
overtime pay due under paragraph 7(a)(1) is an hourly rate calculated by totaling “all remuneration
for employment paid to, or on behalf of, the employee” for the workweek, with the exception of
eight categories of statutory exclusions enumerated in subsection 7(e) of the Act. See 29 U.S.C.
§ 207(e). This sum constitutes an employee’s total “straight-time” earnings for the workweek,
which is then divided by the total hours actually worked by the employee in that same workweek
to arrive at the regular rate. Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 459–60 (1948); see
also 29 C.F.R. § 778.109. The employee’s overtime premium due under paragraph 7(a)(1) for that
workweek is calculated by dividing the regular rate in half (yielding the “half-time” rate) and
multiplying that amount by the hours worked over 40. See 29 C.F.R. § 778.110(a).
As noted above, the Act excludes certain types of payments from the regular rate calculation.
Paragraph 7(e)(3), for example, permits employers to exclude discretionary bonuses from the
regular rate.
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29 U.S.C. § 207(e)(3). Non-discretionary bonuses, on the other hand, must be
included in the regular rate. See 29 C.F.R. §§ 778.208, 778.211; see also WHD Opinion Letter
FLSA2026-2 at 3–4 (Jan. 5, 2026) (explaining that an employer’s non-discretionary bonus must
be included in each employee’s regular rate). The Act also permits employers to exclude from the
regular rate payments which function as overtime premiums for certain hours, such as hours
worked over 40 in a workweek, and to credit those payments toward their overtime pay obligation.
29 U.S.C. §§ 207(e)(5)–(7), (h)(2).
Calculating overtime premiums is straightforward for an employee whose only compensation for
a given workweek is a salary or hourly wage, perhaps occasionally supplemented by an excludable
discretionary bonus. However, for employees who receive nondiscretionary bonuses, the amounts
of those bonus payments are often determined and paid well after the normal workweeks or pay
periods in which they are earned. In such cases, an employer may “disregard the bonus in
computing the regular hourly rate until such time as the amount of the bonus can be ascertained”
and, in the meantime, pay the employee overtime earnings, exclusive of the additional portion on
the bonus, on their regular paydays. See 29 C.F.R. § 778.209(a). Later, when the precise amount

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A bonus is discretionary if “both the fact that payment is to be made and the amount of the payment are
determined at the sole discretion of the employer at or near the end of the period and not pursuant to any
prior contract, agreement, or promise causing the employee to expect such payments regularly[.]” 29
U.S.C. § 207(e)(3) (emphases added).

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of the bonus is ascertained, “it must be apportioned back over the workweeks of the period during
which it may be said to have been earned[,]” and any additional overtime compensation due must
be calculated for each workweek. Id. In other words, the employee’s regular rate for each
workweek is recomputed by adding the bonus to the straight-time earnings already paid, and the
recomputed regular rate is used to determine the overtime premium due. Any overtime premium
already paid for the workweek is subtracted from (or, more precisely, credited toward) the
recomputed overtime premium due so that the additional overtime premium paid is based solely
on the increase in the regular rate resulting from the bonus.
Nevertheless, recomputation of an employee’s regular rate and the resulting additional overtime
pay are unnecessary for a “percentage of total earnings” bonus, although they may be required for
other types of bonuses. Assuming “total earnings” is the sum of an employee’s total straight-time
earnings and total overtime earnings, a percentage of total earnings bonus is a bonus payment that
provides for “the simultaneous payment of overtime compensation due on the bonus” (i.e., its own
required overtime compensation). 29 C.F.R. § 778.210; see also id. § 778.503. This is not an
exception to the FLSA’s overtime pay requirement, but the Division’s longstanding recognition
that a bonus that increases an employee’s total earnings by a fixed percentage “increases both
straight time and overtime wages by the same percentage, and thereby includes proper overtime
compensation as an arithmetic fact.” Id. § 778.503; see also id. § 778.210 (explaining that such
percentage of total earnings bonuses “satisfy in full the overtime provisions of the Act and no
recomputation will be required”); Brock v. Two R Drilling Co., 789 F.2d 1177, 1179 (5th Cir.
1986).
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Requiring additional overtime pay for such bonuses “would be to impose overtime upon
overtime,” and, therefore, be inconsistent with the Act. Siomkin v. Fairchild Camera & Instrument
Corp., 174 F.2d 289, 294 (2d Cir. 1949).
Employers generally calculate total earnings bonuses in one of two ways. The first, as described
in 29 C.F.R. § 778.210, occurs when an employer applies a percentage to an employee’s total
straight-time and overtime earnings directly without regard to how the employee’s earnings or
hours compare to those of other employees. The second takes place when an employer uses
earnings or hours to compare each employee participating in a bonus pool to all the employees
participating in the bonus pool. Like your client, an employer may divide each employee’s total
earnings by the total earnings of all employees participating in the bonus pool and then multiply

2
In 1950, the Division published interpretive guidance in the Code of Federal Regulations that is virtually
identical to 29 C.F.R. § 778.210, see 15 Fed. Reg. 623, 628 (Feb. 4, 1950), reflecting guidance that WHD
originally published in 1941. See WHD Release R-1548(a), “The Effect of Bonus Payments on Computation
of Regular Rate of Pay under the Fair Labor Standards Act” at 2–3 (Sep. 2, 1941) (copy attached). WHD
has consistently applied this tenet. See, e.g., WHD Opinion Letter FLSA-947, at 1–2 (July 14, 1949)
(explaining that, where employees are paid bonuses “arrived at by taking a predetermined percentage of the
total straight-time and overtime earnings of the individual employees during the [same] period[,]” the
“bonus, as a mathematical fact, itself includes the payment of both straight-time and overtime
compensation[,]” satisfies the FLSA’s overtime pay requirement, and thus requires “no recomputations” of
the regular rate) (copy attached). Indeed, we have affirmed these principles on several occasions since. See
WHD Opinion Letter, 1997 WL 998000 (Jan. 23, 1997); WHD Opinion Letter, 2001 WL 1558953 (Feb. 5,
2001); WHD Opinion Letter FLSA2006-4NA (Feb. 17, 2006); WHD Opinion Letter FLSA2019-7 (July 1,
2019); see also WHD Field Operations Handbook (FOH) 32c05a.

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that percentage by the bonus pool amount to determine each employee’s share.
3
Or, as provided
in FOH 32c05a, an employer may divide the bonus pool amount by the participating employees’
total earnings and then multiply that percentage by each employee’s total earnings to determine
his or her bonus payout. Either approach is acceptable.
Generally, an employer may consider additional factors (such as seniority, work location, job title,
base pay, performance, or conduct) to determine the magnitude of an employee’s percentage
increase. As long as the resulting percentage increase to each employee’s pre-bonus overtime
earnings is no less than the percentage increase to their pre-bonus straight-time earnings, then the
principle set forth in sections 778.210 and 778.503 applies even though different employees might
receive different percentages. However, an employer may not use the percentage of total earnings
bonuses “to evade the overtime requirements of the Act[,]” 29 C.F.R. § 778.210, such as where
the percentage bonus “decrease[s] . . . in direct proportion to increases in the number of hours
worked in a week in excess of 40.” See id. § 778.503.
4
An employer also may not dilute an
employee’s overtime earnings by either: (1) applying a higher percentage increase to the straight-
time earnings than the overtime earnings
5
or (2) including items within an employee’s earnings
that were previously excluded from the employee’s regular rate of pay, such as gifts, discretionary
bonuses, expense reimbursements, or employer contributions to employee benefit plans.
6

3
Similarly, a bonus plan could call for an employer to divide the total hours worked by each employee by
the total hours worked by all employees participating in the bonus pool and then multiply that percentage
by the bonus pool amount to determine each employee’s share so long as each hour worked under 40 in a
workweek is valued at one hour and each overtime hour worked is “boosted” to 1.5 hours when determining
total hours worked. See FOH 32c05b. Comparing total hours worked also requires the employer to be
careful with respect to hours that were excluded when determining overtime pay due (for example, vacation
or sick leave hours that were excluded).
4
Where the terms indicate that a bonus is simply a percentage of the employee’s “total earnings,” with no
further indication that it is a percentage of the employee’s total straight-time compensation and total
overtime compensation, WHD will consider as a threshold matter whether it is truly in the nature of a
percentage of total earnings bonus, or is instead a device to evade the FLSA’s overtime requirement as
described in 29 C.F.R. §§ 778.502 and 778.503. There is no indication—and we do not suggest—that your
client’s quarterly bonus is an effort to evade the FLSA’s requirements. Cf. Breig v. Covanta Holding Corp.,
No. 21-865, 2022 WL 837242, at *2–4 (E.D. Pa. Mar. 21, 2022) (affirming the applicability of 29 C.F.R. §
778.210 to a percentage of total earnings bonus where the plaintiff did “not explain how the [bonus plan]
tries to evade overtime requirements other than speculating that it does”).
5
In contrast, a bonus structured to increase an employee’s pre-bonus overtime earnings by a greater
percentage than the employee’s pre-bonus straight-time earnings would not require additional overtime pay
under the FLSA.
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Relatedly, an employee’s earnings may include certain premium payments that are equivalent to FLSA
overtime premiums, even though such payments are excludable from the regular rate of pay. See 29 U.S.C.
§ 207(e)(5)–(7), (h)(2); see also WHD Opinion Letter FLSA2018-9 at 2–3 (Jan. 5, 2018) (explaining that,
consistent with the intent of subsections 7(e) and 7(h) of the FLSA, “an employer’s obligation with regard
to ... the treatment of payments properly excludable under section 7(e)” remains unaffected when
considering whether 29 C.F.R. § 778.210 applies). Notably, when determining whether the FLSA requires
additional overtime pay for a workweek because of a subsequent bonus payment attributed (in whole or in
part) back to that workweek, an employer may credit excess premium payments described in sections

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Where an employer, like your client, compares each employee’s total earnings to the total earnings
of all the employees in the bonus pool to determine the share of the bonus pool to pay each
participating employee, each employee receives a different percentage of the bonus pool. Notably,
each employee in the bonus pool is still being paid as a bonus a fixed percentage of his or her own
total earnings, and the formula for determining that percentage is the same for all the employees:
the bonus pool amount divided by the total earnings of all employees participating in the pool. See
FOH 32c05a. For example, if the bonus pool amount is $10,000 and the total earnings of all
employees participating in the pool is $40,000, then each employee should receive a bonus that
increases their respective total earnings by 25%. If the bonus pool amount is $20,000 and the total
earnings of all employees participating in the pool is $200,000, then each employee should receive
a bonus that increases their total earnings by 10%. Thus, although set forth as a percentage of a
bonus pool, this payment operates the same as a bonus where the percentage is applied directly to
a particular employee’s total earnings. Accordingly, it satisfies the requirements of 29 C.F.R.
§ 778.210 and, therefore, constitutes a percentage of total earnings bonus, even if the bonus plan
does not describe the bonus in such terms.
OPINION
Based on the facts you have provided and the principles recounted above, we conclude that your
client’s quarterly non-discretionary bonus, if calculated as described below, constitutes a
percentage of total earnings bonus under section 778.210 that already includes payment of the
overtime premium compensation due on said bonus under the Act. Although we do not know the
eligibility requirements for the bonus pool or whether there are any other factors given weight
when allocating the pool among participants, we have assumed for purposes of this analysis that
there are no additional factors (for determining the quarter, eligibility, or allocation among
participants) that would result in the bonus payments for a quarter not being the same percentage
of each participating employee’s straight-time earnings and overtime earnings for the quarter.
As an initial matter, the Act does not regulate an employer’s determination of the total amount
available to employees in a bonus pool. So, while the available bonus you describe is derived from
your client’s total gross sales revenue for the quarter, it also could be derived from another metric,
such as a methodology tied to the employer’s quarterly profits or available financial assets.
Next, we believe that your client’s approach of comparing each participating employee’s total
earnings to the total earnings of all participating employees, as you described, should result in an
acceptable percentage of total earnings bonus under section 778.210 so long as the earnings for
each employee include any required overtime premiums and do not include any amounts
previously excluded from the regular rate of pay when determining those overtime premiums.

For
section 778.210 to apply, the bonus must be a percentage of each employee’s total earnings—both
straight-time earnings and overtime earnings—that does not dilute the overtime portion of the
ratio. Although your client calculates the bonus paid out to each participating employee as a
percentage of the bonus pool, each employee is paid a bonus which is equal to the same fixed

7(e)(5)–(7) of the FLSA, such as overtime pay for work in excess of a daily standard or overtime pay paid
at a rate which is greater than 1.5 times the employee’s regular rate of pay, against any overtime obligation
attributable to the bonus. See 29 U.S.C. §§ 207(e)(5)–(7), (h)(2).

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percentage of his or her total earnings, i.e., the bonus pool amount divided by the total earnings of
all employees participating in the pool.
A simple example illustrates the point. Suppose that four employees are each paid a $10 hourly
rate and work 35 hours, 40 hours, 50 hours, and 60 hours respectively in a workweek. The
available bonus pool for the employees for that workweek is $800, all of their total (straight-time
and overtime) earnings for the workweek is $2,000, and each employee’s bonus equals the
percentage that his or her total (straight-time and overtime) earnings is of all the participating
employees’ earnings, as follows:

Straight-
Time
Earnings
($10 per
hour)
Overtime
Earnings
($5 per hour
in excess of 40)
Total
Earnings
Bonus Paid
Bonus
Percentage of
Total Earnings
7

Employee A
(35 hours)
$350 $0 $350
$140 or
(350 ÷ $2,000) × $800
140 ÷ 350 = 40%
Employee B
(40 hours)
$400 $0 $400
$160 or
(400 ÷ $2,000) × $800
160 ÷ 400 = 40%
Employee C
(50 hours)
$500 $50 $550
$220 or
(550 ÷ $2,000) × $800
220 ÷ 550 = 40%
Employee D
(60 hours)
$600 $100 $700
$280 or
(700 ÷ $2,000) × $800
280 ÷ 700 = 40%
Total $1,850 $150 $2,000 $800

Employees A and B did not work overtime that workweek, but the overtime earnings of Employees
C and D are accounted for in the bonus calculation because the bonus is determined using the
employees’ total earnings (including overtime pay). And as the table below indicates, this
percentage-of-total-earnings bonus increases each employee’s pre-bonus overtime earnings by the
same percentage as it increases their pre-bonus straight-time earnings (even though each employee
receives a different bonus amount), as follows:
Straight-Time
Earnings Increase
Overtime Premium
Earnings Increase
Total Earnings Increase
Employee A $350 × 40% $0 × 40% $140 + $0 = $140
Employee B $400 × 40% $0 × 40% $160 + $0 = $160
Employee C $500 × 40% $50 × 40% $200 + $20 = $220
Employee D $600 × 40% $100 × 40% $240 + $40 = $280

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Consistent with the above explanation, the percentage of total earnings represented by the bonus for each
employee (i.e., 40 percent) is the same as the bonus pool amount ($800) divided by the total earnings of all
employees participating in the pool ($2,000), or 40 percent.

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Accordingly, the bonus above includes simultaneous payment of overtime compensation due
Employees C and D on the bonus, satisfying the FLSA’s overtime pay requirement elucidated by
section 778.210. Recomputing overtime due Employees C and D in light of the bonuses under
section 778.209 yields the same result—demonstrating why a percentage of total earnings bonus
includes proper overtime compensation as an “arithmetic fact.” For example, Employee C
received $770 in total pay for the workweek with the bonus and no recomputation of overtime.
Applying section 778.209 instead, Employee C’s regular rate is $14 ($500 in straight-time earnings
($10 per hour × 50 hours worked) + $200 of the bonus—the $220 bonus less the $20 of the bonus
that was a percentage of overtime earnings and is thus excluded from the regular rate under 29
U.S.C. § 207(e)(5)—equals $700 ÷ 50 hours worked), yielding $70 in overtime premium pay due
($14 × 0.5 ×10 overtime hours worked) for total pay due of $770 ($700 in straight-time + $70 in
overtime). Sections 778.210 and 778.503 explain that such recomputation is not necessary for
valid percentage of total earnings bonuses, such as your client’s bonus, as you describe it.
This letter is an official interpretation of the governing statutes and regulations by the
Administrator of the Wage and Hour Division of the United States Department of Labor for
purposes of the Portal-to-Portal Act. See 29 U.S.C. § 259. This interpretation may be relied upon
in accordance with section 10 of the Portal-to-Portal Act, notwithstanding that after any such act
or omission in the course of such reliance, the interpretation is “modified or rescinded or is
determined by judicial authority to be invalid or of no legal effect.” Id.
We trust that this letter is responsive to your inquiry.
Sincerely,

Andrew B. Rogers
Administrator

*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C.
§ 552(b)(6). You represent that you do not seek this opinion for any party that the Wage and Hour
Division (WHD) is currently investigating or for any litigation that commenced prior to your
request. This opinion is based exclusively on the facts and circumstances described in your request
and is given based on your representation, express or implied, that you have provided a full and
fair description of all the facts and circumstances that would be pertinent to our consideration of
the question presented. The existence of any other factual or historical background not contained
in your letter might require a conclusion different from the one expressed herein.