FLSA 29 U.S.C. § 207(e)(3)
Authoritative Statutory Source
Discretionary Bonus
Spontaneous reward paid solely at employer discretion, excluded from FLSA overtime regular rate.
Detailed Definition & Statutory Context
Discretionary Bonus is governed by FLSA 29 U.S.C. § 207(e)(3) standards across corporate payroll administration, statutory tax withholding, and general ledger labor accounting. Rigorous compliance with Discretionary Bonus prevents IRS Form 941 deposit penalties and FLSA wage-and-hour litigation.
Statutory Formula & Equation
Excluded Bonus = Paid Without Prior Contract, Metric, or Employee Expectation
General Ledger / Payroll Journal Entry Standard
Debit: Gross Payroll Expense / Employer Tax Expense
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Common Operational Pitfalls
- Excluding non-discretionary bonuses from FLSA overtime regular-rate calculations.
- Failing to cap Social Security tax withholding once employee earnings exceed the $168,600 wage base.
- Misclassifying non-exempt hourly employees as exempt salaried workers.