headshot of Secretary of Labor Eugene Scalia
Secretary of Labor Eugene Scalia

Employers can now offer bonuses or other incentive-based pay to employees whose hours vary from week to week, under a final rule announced by the U.S. Department of Labor’s Wage and Hour Division.

The final rule clarifies that bonuses, premium payments, commissions and hazard pay, in addition to the fixed salary, are compatible with the use of the fluctuating workweek method under the Fair Labor Standards Act.

This rule will allow employers and employees to “better utilize flexible work schedules. This is especially important as workers return to work following the COVID-19 pandemic,” according to the agency.

The payment of additional bonus and premium payments on top of an employee’s fixed salary under the fluctuating workweek method has presented challenges to employers and the courts, according to the document. This rule is meant to make it easier for employers and their employees to “agree to unique scheduling arrangements while allowing employees to retain access to the bonuses and premiums they would otherwise earn.”

“Because of the clarity provided by this rule, employers will know they can pay workers’ bonuses in a broader range of circumstances,” U.S. Secretary of Labor Eugene Scalia said in a statement. “This rule comes at a time when millions of Americans are returning to work and will benefit from added flexibility in compensation.”

Wage and Hour Division Administrator Cheryl Stanton said job creators faced uncertainty regarding their ability to pay bonuses to workers with fluctuating workweeks.

“This final rule will provide much needed clarity for job creators who are looking for new ways to better compensate their workers,” Stanton said. “As employers navigate the challenges of the coronavirus, the rule enhances flexibility to provide hazard pay, and to promote health and safety in the workplace through flexible work schedules that stagger start and end times and implement social distancing in the workplace.”