Example #2—Nurse Retention bonuses (Part 3 of 3)
A health care organization’s nursing department gives hourly paid LPNs and RNs a $2,000 bonus after being employed for 6 months to both retain and attract more nursing personnel. In this instance, the bonus will be included in the regular rate calculation during weeks in the period in which overtime was worked. The key is to know how the bonus was earned. That is, was it a one time bonus? Or was it for work that was performed over a series of months. In this example is the latter.
The $2,000 retention bonus described above was earned over 6 months or 26 weeks. Equivalently, the weekly bonus can thought of as a weekly bonus of $76.92 ($2,000 ÷ 26 weeks). If an employee works overtime during the 26-week period, the increase in the regular rate is calculated by dividing $76.92 by the total hours worked during the overtime week.
The procedure for calculating OT is the same as described in Part 2 of this series. If the employee worked 10 hours of overtime ( a total of 50 hours of work in the pay period) in their 9th week of employment, the employee would be due an additional $7.70 in overtime earning in that time period. The calculation is as follows:
1. Calculate the increase in regular rate due to the bonus
$76.92 ($2,000 ÷ 26 weeks) ÷ 50 hours = $1.54 (increase in the regular rate)
Note: The daily bonus is spread equally of all the hours worked in the time period where there is OT.
2. Calculate the increase in the half time (.5) portion of the OT premium
$1.54 x ½ = $ .77 (increase in the additional half-time premium)
3. Calculate the addition OT premium due to the individual.
$ .77 x 10 hours of overtime worked = $7.70 (increase in overtime earnings due to the bonus)
The calculation can also be performed as described in yesterday’s post. The results will be the same. The key is to recognize that the bonus is spread over the time period that the bonus was earned.