Non-discretionary bonuses under the Service Contract and Davis Bacon acts

bonus pay for prevailing wage contractors


The Department of Labor recently issued an opinion letter around the topic of non-discretionary bonuses for prevailing wage contractors. Specifically the letter addresses if federal contractors are permitted to pay non-discretionary bonuses as a lump-sum as opposed to including the bonus in weekly pay.

What is a non-discretionary bonus?
A non-discretionary bonus is not voluntary for federal contractors, it is mandated, generally under a hiring or collective bargaining agreement. Non-discretionary bonuses are often structured as a fixed percentage of wages earned over hours worked which qualify for the bonus.

What question is WHD’s July opinion letter addressing?
Does a Federal Contractor with a prevailing wage workforce have to include non-discretionary bonus pay (that is a fixed percentage of time worked) in the calculation of an employee’s regular pay rate at the end of each workweek, or is it acceptable to pay the bonus at a future date by recalculating rates for past weeks factoring in the bonus?

What is the WHD’s stance?
The opinion letter confirms that employers may either payout non-discretionary bonus funds in an employee’s weekly paycheck OR “disregard the bonus in computing the employee’s regular hourly rate until such time as the bonus can be ascertained.” Once conditions have been met for the bonus to be paid out (usually a time window, for example six months) The employer can retrospectively re-calculate the regular pay rate for each past week which qualified for the bonus and pay the bonus funds across those weeks as one lump-sum. The letter also clarifies that non-discretionary bonuses may not be leveraged as a way to evade overtime pay requirements outlined in the Fair Labor Standards Act. Non-discretionary bonuses must be made above and inclusive of overtime pay.

Helpful resources:

New Wage and Hour Opinion Letters on Nondiscretionary Bonuses, the Highly Compensated Employee Exemption, and Rounding Practices

3 handbook cover images.

For Government Contractors

Our Contract Compliance
Handbook Series will help ensure your company is fully compliant and positioned to win and secure more bids!


AD & D
Affordable Care Act
AK Prevailing Wage
AL Prevailing Wage
AR Prevailing Wage
AZ Prevailing Wage
CA Prevailing Wag
CA Prevailing Wage
CA Prevailing Wage 401k
Call Centers
CO Prevailing Wage
Compliance Tips
Critical Illness
CT Prevailing Wage
Davis Bacon Act
DE Prevailing Wage
Department of Labor
Disability Insurance
Employee Benefits
Employee Training
Employer Tips
Farm Labor Plan
Fixed Indemnity
FL Prevailing Wage
Fringe Benefits
GA Prevailing Wage
Government Contracting
Government Contractors
Health and Welfare Wrap
Healthcare Benefits
HI Prevailing Wage
Hospitality Benefits
Hourly Seasonal Workers
Hourly Workforce
Human Resources
ID Prevailing Wage
IL Prevailing Wage
IN Prevailing Wage
IO Prevailing Wage
KS Prevailing Wage
KY Prevailing Wage
LA Prevailing Wage
Limited Medical
MA Prevailing Wage
Major Medical Insurance
McNamara-O’Hara Act
MD Prevailing Wage
ME Prevailing Wage
MI Prevailing Wage
MN Prevailing Wage
MO Prevailing Wage
MS Prevailing Wage
MT Prevailing Wage
NC Prevailing Wage
ND Prevailing Wage
NE Prevailing Wage
NH Prevailing Wage
NJ Prevailing Wage
NM Prevailing Wage
NSRMCA Members
NV Prevailing Wage
NY prevailing wage
OH Prevailing Wage
OK Prevailing Wage
OR Prevailing Wage
PA Prevailing Wage
Part Time Employees
Podcast Guest Appearances
Prevailing Wage
Prevailing Wage Workers
Restaurant Group Benefits
Retirement Plans
RI Prevailing Wage
SC Prevailing Wage
SCA Audits
SCA Compliance
SD Prevailing Wage
Seasonal Workers
Service Contract Act
Small Business
State Prevailing Wage
SUB Plan
Supplemental Benefits
Supplemental Unemployment
Third Party Administrator
TN Prevailing Wage
Trust Services
TX prevailing wage
UT Prevailing Wage
VA Prevailing Wage
Violations – SCA
Voluntary Benefits
WA Prevailing Wage
WI Prevailing Wage
Workplace Health
Workplace Safety
WV Prevailing Wage
WY Prevailing Wage