NCWHA governs employee incentive and bonus plans

Incentive-pay programs and bonus plans are very common in North Carolina and sometimes constitute a significant portion of an employee’s pay. Employers believe these plans permit them to align pay with the quantity and quality of an employee’s work. Employees see them as an opportunity to earn more money and be paid what they are worth.

Employment contracts often don’t detail how these programs work. Rather, employers offer them as part of an overall compensation package.

Thus, if a dispute develops, the employee does not have a claim for breach of an employment contract. Instead, the North Carolina Wage and Hour Act (NCWHA) applies. The application of the NCWHA, which contains notice and nonforfeiture requirements, often takes employers and employees by surprise.

Intent of the law

The NCWHA requires employers to:

• Notify employees, in writing or via posted notice, of the terms of their compensation and benefits.
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