The use of incentive based compensation tied to productivity, quality and efficiency is a way for employers to encourage superior performance and for employees to earn additional compensation. Unfortunately, as currently written, the FLSA discourages employers from offering incentive-based compensation. Each time a non-exempt employee receives a bonus or other type of incentive pay the employer must go back and recalculate the employee's hourly pay rate for the time period on which the incentive is based. Moreover, the use of incentive bonuses and gainsharing is a win-win situation.
Studies show that incentive pay can significantly increase employee compensation.
Incentive compensation can also reduce turnover, grievances, and absenteeism, raise employee morale and create better labor-management relations. Thank you again for introducing the Bonus Incentive Act and taking an important step towards bringing the FLSA into the 21st Century. We look forward to working with you on its passage.