Pennsylvania law specifies that bonuses paid as gifts do not have to be added in when determining the employee's regular rate of pay for calculating overtime (PA Stat. Tit. 34 Sec. 231.43). These are called discretionary bonuses characterized by the facts that the employer has the sole discretion over whether payment is to be made, and the amount of the payment, and that the employer makes the decision to pay at or near the end of the period that defines the bonus. In addition, a discretionary bonus payment may not be made pursuant to any prior contract, agreement, or promise that would cause the employee to expect to receive this type of bonus payment regularly.
If the bonus is in any way determined by hours worked, production, or efficiency, the extra pay must be added in for the pay period in which it is awarded. These are called nondiscretionary bonuses.
Practice tip: To minimize overtime costs and complications, schedule performance bonus awards tocoincide with shorter workweeks.