Q. I started a business a few years ago, but this is the first year that I actually have an office with employees. I would like to give them holiday bonuses this year. What are the legal guidelines I should follow?
A. Make it clear to employees that these bonuses are discretionary. If they are not clearly discretionary, the bonuses will be considered wages under the state wage payment laws. Perhaps more important, they would be considered wages under the Fair Labor Standards Act.
The result is that—to the extent anyreceive nondiscretionary bonuses—the amount of the bonus recalculates their regular wage rate, and any overtime they earned over the course of the year would need to be adjusted accordingly. Minimize the problem by spelling out that the bonuses are discretionary gifts, not compensation.