Law & Order

U.S. Department of Labor Updates Rules on Perks and Benefits That May Be Excluded When Calculating Pay Rates

By SEMA Washington, D.C. Staff

The U.S. Department of Labor (DOL) updated its rules on what may be excluded when calculating an employee’s regular rate of pay, which then forms the basis for “time and one-half” overtime pay. The DOL’s final rule marks the first update to the Fair Labor Standards Act regulation in more than 50 years. At issue is which perks and benefits may be excluded in the regular rate of pay calculation and, conversely, which must be included.

Under the DOL rules, employers may exclude the following from an employee’s regular rate of pay calculation:

  • The cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider or a student-loan program) and adoption assistance.
  • Payments for unused paid leave, including paid sick leave or paid time off.
  • Payments of certain penalties required under state and local scheduling laws.
  • Reimbursed expenses, including cellphone plans, credentialing exam fees, organization membership dues and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments.”
  • Certain sign-on bonuses and certain longevity bonuses.
  • The cost of office coffee and snacks to employees as gifts.
  • Discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples.
  • Contributions to benefit plans for accident, unemployment, legal services or other events that could cause future financial hardship or expense.

For more information, contact Stuart Gosswein at stuartg@sema.org.