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To support compliance with California wage and hour regulations, Greenshades has introduced a new setting for pay codes that allows you to accurately calculate the regular rate of pay (RROP) for flat sum bonuses paid your to non-exempt California employees.

What’s new

When creating or editing a pay code of fixed amount bonus type, you have a new setting: a checkbox labeled Is CA flat sum bonus.

  • When checked, this pay code will be treated using California’s required method for calculating the regular rate of pay when a flat sum bonus is paid.
  • When unchecked, the bonus will use the standard method (pro-rated across all hours worked), consistent with federal rules or other state guidelines).

This new checkbox ensures – when a flat sum bonus is issued – correct overtime pay calculations under California law.

What is a flat sum bonus?

It is a bonus paid in a set amount, regardless of how many hours an employee works or how productive they are. Examples include:

  • Safety bonuses
  • Attendance bonuses
  • Spot bonuses
  • Referral bonuses (if flat dollar amounts)

This differs from production-based bonuses or commissions, which vary based on output or performance.

How the California calculation works

Under California law, calculating the regular rate of pay for the purposes of overtime flat sum bonuses must be divided only by the non-overtime hours worked during the pay period and multiplied by 1.5 or 2.

Correct California method:

Regular Rate = (Flat Sum Bonus) ÷ (Total Non-Overtime Hours Worked)

The additional overtime due for the bonus is calculated using this regular rate:

Overtime Premium = Regular Rate × 1.5 × Overtime Hours

Note: This differs from the federal method, which divides the bonus by total hours worked (including overtime) and multiplies by 0.5 or 1.

Example

An employee in Calilfornia making $20 per hour works 45 hours a week and receives a $100 flat sum bonus.

  • Non-overtime hours: 40
  • Overtime hours: 5

Method 1: Using the FLSA Regular Rate of Pay rules

  1. Determine the base hourly pay. $20 x 45 = $900
  2. Add the bonus amount. $900 + $100 = $1,000
  3. Divide the total amount by the total hours worked to get the regular rate of pay. $1,000 / 45 = $22.22
  4. Because the base amount already includes the overtime hours, we need to multiply the regular rate by 0.5 to get the overtime premium rate. $22.22 * 0.5 = $11.11
  5. Multiply the premium rate by the overtime hours worked. $11.11 * 5 = $55.55
  6. Add the additional overtime pay to your total earnings in step 2. $1,055.55 gross pay.

Method 2: Using the California flat sum rules

  1. Calculate the employee’s straight time hours. 45 x $20 = $900
  2. Next calculate the overtime premium for the regular earnings. $20 * 0.5 * 5 hours = $50
  3. Add both totals together. $900 + $50 = $950
  4. Calculate the OT compensation attributed to the bonus:
    1. Divide the bonus by the number of non-overtime hours. $100 / 40 = $2.50
    2. Multiply that by the 1.5 overtime factor. = $2.50 x 1.5 = $3.75
  5. Multiply the overtime value of the bonus by the overtime hours worked. $3.75 x 5 = $18.75
  6. Add the hourly wages, bonus, and overtime bonus amounts. $950 + $18.75 + $100 = $1068.75

As demonstrated, the updated California method pays the employee an additional $13.20.

How to use this setting

  1. Navigate to Company Settings > Payroll > Codes.
  2. Create or edit a bonus-type Earning Code.
  3. Go to Calculation Details.
  4. Check the box: Is CA flat sum bonus. This will only show if the code contributes to Regular Rate of Pay.
  5. Save the Earning Code.

This setting will now ensure the bonus is included in RROP calculations using California's required method when overtime is present.

When to use this setting

Use the Is CA flat sum bonus setting when:

  • The bonus is not tied to production or performance.
  • The employee is non-exempt and subject to California wage laws.
  • The bonus is a fixed amount, regardless of the hours worked.

Do not use this setting for:

  • Commission-based or variable bonuses
  • Performance-based incentive pay
  • Employees outside of California

You can find more details on the California flat sum bonus and rate of pay on their Overtime FAQ sheet.

Keywords: California, flat sum bonus, bonus, CA