Chapter 1 established that overtime pay rests on the regular rate, and section 7(e) of the Act treats “all remuneration for employment” as part of that rate except eight specified exclusions — bonuses are the most common place employers get this wrong. Any bonus that does not qualify for one of the statutory exclusions must be totaled in with the employee's other earnings before the regular rate is calculated, and that captures far more of what businesses call a “bonus” than most owners expect. A bonus announced in advance — even informally, even to induce steadier work, faster work, more accurate work, or simply staying through the season — has already left the excludable category, because the employer has abandoned discretion over the fact of payment. Most attendance bonuses, most individual or group production bonuses, most bonuses for quality and accuracy, and most bonuses conditioned on the employee still being on the payroll when the bonus is paid fall on this side of the line and must be included in the regular rate.

Discretionary bonuses sit on the other side, but the discretion has to be real and it has to last until close to the end of the period the bonus covers. Both the fact that a bonus will be paid and its amount must remain in the employer's sole discretion at or near the end of the period, with no prior contract, agreement, or promise that would lead an employee to expect the payment regularly. A bonus that starts out discretionary as to amount but is announced in advance as to timing — “everyone gets a bonus in June, amount to be decided” — has already lost its exclusion, because the promise itself creates the expectation the rule is built to test for. What the bonus is called does not settle the question; a payment labeled a “spot bonus” or an “appreciation award” is judged on whether payment and amount were actually left open until near the end of the period, not on its name. Bonuses for unique or extraordinary effort not tied to preset criteria, severance bonuses, referral bonuses paid to employees who are not primarily engaged in recruiting (since for an employee whose job is recruiting, a referral bonus is compensation for ordinary job duties rather than a discretionary award), and employee-of-the-month awards are the kind of payments that can qualify, provided the facts back up the discretion.

Gifts and special-occasion bonuses are excluded on different grounds: they are not compensation for work at all, as long as the amount is not measured by or dependent on hours worked, production, or efficiency. A Christmas bonus can be paid every year, in an amount employees have come to expect, and can even scale with salary or length of service, and still qualify as a gift — regularity and predictability do not disqualify it. What does disqualify it is tying the amount to output: a payment geared to hours, units produced, or efficiency is functioning as wages regardless of when it is paid or what it is called, and a bonus so large that employees would reasonably treat it as part of what they work for stops being “in the nature of a gift” as well.