July 23, 2020
How do I count overtime or bonus pay in the Salary Reduction Factor calculation?
Posted by Armanino Financial Advisory Team
Overtime pay is paid to hourly employees. For those employees, you use the employee’s standard average hourly wage (e.g., $20.00 per hour) as the basis for determining a reduction, such that any reduction that exceeds a 25% cut (e.g., standard hourly wage reduced from $20.00 per hour to $14.00 per hour) must be included. Overtime becomes relevant after this step when you multiply the value of the reduced hourly wage beyond 25% (in this example, the difference between $15.00 and $14.00, or $1.00) by the average number of weekly hours during Q1 2020 (which may have included overtime hours). For salaried people, bonus compensation is not included for purposes of the salary reduction. The calculation is looking at salary on an average basis during the Covered Period versus average salary during the baseline period and comparing the two.