Which bonuses count
Bonuses the employee was promised or expected to get are non-discretionary, and they are part of the regular rate. Examples are attendance, production, safety and retention bonuses announced in advance. Bonuses that are truly at the employer's discretion, like an unannounced holiday gift, are left out (DOL Fact Sheet #56A).
Worked example: bonus paid with the week
An employee earns $18 an hour, works 45 hours, and earns a $90 attendance bonus for the week.
| Step | Calculation | Amount |
|---|---|---|
| Straight-time pay | 45 hours × $18 | $810.00 |
| Add the bonus | $810 + $90 | $900.00 |
| Regular rate | $900 ÷ 45 hours | $20.00 |
| Overtime hours | 45 − 40 | 5 |
| Qualified overtime (code TT) | ½ × $20.00 × 5 | $50.00 |
Without the bonus, the same week gives $45.00. The extra $5.00 is the overtime premium the bonus creates.
Bonuses that cover several weeks
A monthly or quarterly bonus is spread over the workweeks it was earned in. Each week's share is added to that week's pay. For example, a $390 quarterly bonus earned over 13 weeks adds $30 to each week. For a 45-hour week at $18, that raises the regular rate to $18.67 and the qualified overtime from $45.00 to $46.67.
When the bonus is paid in a later year
The W-2 generally reports pay in the year it is paid. If a bonus for 2026 work is paid in March 2027, the extra overtime it creates belongs on the 2027 W-2, while the overtime already paid in 2026 stays on the 2026 W-2 (IRS FS-2026-13; 29 CFR 778.209).
| Paid | Code TT | |
|---|---|---|
| 45 hours at $20, paid with the week | November 2026 | $50.00 on the 2026 W-2 |
| $90 bonus for that week, paid later | March 2027 | $5.00 on the 2027 W-2 |
The batch calculator handles this with an optional Bonus Pay Date column. Enter the date the bonus was paid, and its extra overtime is counted in that year.
The free calculator shows every step. For a whole team's W-2 totals, the batch version reads your timesheet export.
Questions
Does a discretionary bonus change code TT?
No. Only non-discretionary bonuses (ones the employee was promised or expected) are part of the regular rate. A truly discretionary bonus is left out.
How do I handle a quarterly bonus?
Spread it over the workweeks it was earned in, add each week's share to that week's pay, and recalculate the overtime premium for each week. If the bonus is paid in a later year, the extra overtime goes on that later year's W-2.