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Employee bonuses in California: An essential guide for HR professionals

Offering bonuses to California employees is more complex than one might think. I presented on the topic of employee bonuses during my August HR Bites series of employment law-related discussions, during which I touched on the role and implementation of signing bonuses, relocation bonuses, retention bonuses, and incentive pay bonuses and how they are earned, when they should be paid, and how they affect overall compensation. I also addressed why bonuses can haunt employers even after an employee is terminated.

For those who many have missed the presentation, I wanted to share the article “Employee bonuses in California: An essential guide for HR professionals” for which I was recently interviewed by an editor of the Human Resources Director publication. My quotes are listed below.

"It's key to understand that it will not be merely about the terminology used in bonus agreements. It's about grasping the essence of what 'discretionary' and 'non-discretionary' bonuses genuinely signify," she tells HRD. Non-discretionary bonuses are earned. Discretionary bonuses are more akin to gifts.

"Once you establish the criteria for its attainment, its discretionary nature may effectively get nullified if you are providing the terms for earning it."

“Many disputes stem from bonus plans that haven't been vetted by HR or reviewed by counsel. A company's intentions might be well-placed, but they could inadvertently stray from legal guidelines.”

"While it might not be the most user-friendly, it's a treasure trove of official opinion letters on bonuses. Engaging a knowledgeable, California-focused employment attorney is also invaluable. Such expertise not only provides clarity but can also shield businesses from unanticipated legal entanglements and significant financial repercussions.”

"With non-exempt or hourly workers, bonuses can complicate overtime calculations for employers. If a company pays non-discretionary bonuses, these must be factored into the regular hourly pay, which subsequently impacts overtime calculations and even premium payments." 

“A proactive approach, rooted in clarity and legal expertise, can pre-empt a multitude of potential challenges down the line."

The full article can be accessed here.