Paramedic Sign-On Bonuses, the Regular Rate and the FLSA

Today’s FLSA Question: My fire department initiated a “sign-on bonus” program for paramedics a couple of years ago. Under the terms of the program, lateral paramedic transfers received a one-time $5,000 sign-on bonus at the time of hire. In exchange for the bonus, the paramedic signed an agreement that they would remain employed with the fire department for at least two years. Does this bonus need to be included in the paramedic’s regular rate or pay?

Answer:

Based on the information that you have provided, the paramedic sign-on bonus must be included in the paramedic’s regular rate of pay. The FLSA requires virtually all the money an employer pays to an employee included in that employee’s regular rate of pay. Since all FLSA overtime must be paid at a rate not less than time and one-half of the employee’s regular rate, proper calculation of the employee’s regular rate is critical. Mistakes related to the proper calculation of an employee’s regular rate are not uncommon.

There are a couple of reasons why this bonus cannot be excluded from the the paramedic’s regular rate of pay.

First, the bonus is premised on the paramedic’s continued employment. Department of Labor (DOL) regulations found at 29 CFR §778.211(c) state: “any bonus which is promised to employees upon hiring … would not be excluded from the regular rate.” Here the bonus is clearly promised to the paramedics in writing at the time of hire.

Second, the same regulation goes on to include the following: “bonuses which are announced to employees to induce them to … remain with the firm are regarded as part of the regular rate of pay.” Here, the sign-on bonus is designed to attract and retain the paramedics for at least the two-year term of the agreement.

If the sign-on bonus contained no requirement to remain employed for any period of time after beginning employment and receiving the bonus, the outcome could be different. If the bonus was intended to reimburse relocation costs for new paramedics up to a maximum of $5,000, the outcome could also be different. However, given the facts presented, the sign-on bonus cannot be excluded from the paramedic’s regular rate of pay.