Chapter 7 introduced the pseudo percentage bonus as one of the artificial devices that don’t survive scrutiny, alongside the split-day plan (§ 7.7). This section walks through exactly how the device is built and sets it against the one percentage bonus that does hold up on its own arithmetic. A genuine percentage bonus, described in § 778.210, is a plan that promises additional compensation at a single fixed percentage of both straight-time earnings and overtime earnings — the regulation’s own example uses 10 percent of straight-time earnings and 10 percent of overtime earnings, paid unconditionally under a contract made before the work is performed. Because the same percentage lifts both pieces of pay, the arithmetic itself preserves the correct overtime relationship, and no separate recomputation of the regular rate is ever required.

The pseudo version, addressed in § 778.503, is built backward from a target instead of forward from a rate. The employer fixes the dollar amount it intends to pay each week no matter what, then works out, after the fact, whatever percentage of that week’s total hourly-rate earnings — straight-time pay for the first 40 hours plus the artificial time and one-half pay for the overtime hours actually worked — closes the gap between those earnings and the flat weekly total. In the regulation’s own figures, the “bonus” runs 33.45 percent of the $224.80 straight-time total in a 40-hour week, drops to 19.96 percent of a $250.09 base ($224.80 straight-time pay plus $25.29 overtime-hour pay) once three overtime hours are worked, and drops again to 2.66 percent of a $292.24 base ($224.80 plus $67.44) at 48 hours — every week landing on the identical $300 total. The percentage moves precisely because the hours moved; that is the mechanism, not a coincidence.

The tell is not the label — both structures call themselves a percentage bonus — but whether the percentage itself stays fixed or floats to defend a flat dollar total. A genuine plan states one percentage and holds it constant every week, so the bonus dollar amount rises and falls with actual straight-time and overtime earnings because hours changed. A pseudo plan’s percentage moves in the opposite direction from hours, shrinking as overtime hours climb, because its entire function is to cancel out the extra pay those hours would otherwise produce. The employee in that scheme is, in fact, being paid no overtime compensation at all; the regular rate actually in effect each week is nothing more than the flat total divided by whatever hours were worked that week. § 778.503 directs that the overtime actually owed in that scheme is computed as shown in § 778.114 — the fluctuating workweek method — because the flat weekly total already covers straight-time pay for every hour worked, so the fix is additional half-time pay on the true regular rate, not a fresh time-and-one-half recalculation.