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November 12, 2001
House Bill Would Amend FLSA to Permit More Bonuses
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year old law discourages incentives to hourly workers

Legislation (S.1878) introduced by Senator Kay Bailey Hutchison (R-TX) would amend the Fair Labor Standards Act (FLSA) and make it easier for employers to offer bonuses and incentive pay to employees.

For more than 60 years, the FLSA has provided a minimum floor of compensation standards for the American worker. Unfortunately, in the modern workplace that floor has become an obstacle - preventing employees from reaping the benefits of incentive-based compensation plans.

Currently, the FLSA requires employers to recalculate overtime pay for hourly employees who are paid bonuses based on performance or productivity. For many companies, the extremely time-consuming process of recalculating overtime pay is enough disincentive for them to forego any type of incentive and/or non-discretionary bonus plans to its hourly employees. The end result is a lose-lose situation where the employee loses a bonus and the employer loses worker productivity and morale. S. 1878 would eliminate the requirement of employers to recalculate overtime pay.

SHRM has come out with strong support of Hutchinson's bill in a recent press release. "With less then 100 days left before the start of a new millennium, Congress continues to hold onto a law passed more than six decades ago when the American marketplace was entirely different. It is a new era, a new economy and a new workforce," said SHRM Executive Vice President and COO, Susan R. Meisinger, SPHR. "Congress should move forward and recognize that incentive-based compensation plans are a more modern way to reward employees. Legislation to remove the obstacles for employers to provide bonuses is long overdue."

The SHRM release continued: "The benefits of bonus and gainsharing programs tied to productivity and efficiencies have been long recognized as a way to improve labor management relations and reduce absenteeism, turnover and grievances. The global marketplace demands that our laws provide the flexibility to retain the best and brightest. "

Sen. Hutchison's legislation is companion legislation to H.R. 1381, introduced by U.S. Rep. Cass Ballenger (R-NC). H.R. 1381 passed the House Education and Workforce Committee in June of this year.

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