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Bonus Pay

What Is Bonus Pay? A Definition for Office Managers. 

Everyone loves a bonus, including hard-working healthcare employees! Bonus pay is a benefit paid to employees on top of their regular salary. Think of it as a “thank you” to someone  who has gone above-and-beyond or achieved a specific goal in your practice. For example, a nurse who has worked overtime during the coronavirus pandemic or a hygienist who met a production goal.

Practices often determine:

  • Which employees receive bonus payments (doctors, dentists, physicians, pharmacists, billing managers, etc.).
  • The amount of bonus pay given to employees.
  • The frequency of bonus payments (every week, every month, one lump sum, etc.).

Sometimes practices include bonus payments in employee contracts, and these payments make up a percentage of an employee's base rate of pay.

Read on for a full definition of bonus pay and learn the benefits of using an HR software to manage these payments. 

Bonus Pay Definition

Bonus pay is financial compensation given to employees on top of their regular earnings. It is a popular employee benefit in healthcare. Below are some examples of when an employee might receive bonus payments:

  • A family physician has worked overtime, including weekends, after two colleagues left her practice. Or a family physician has hit her production goals by seeing a certain number of patients within a particular time frame.
  • A billing assistant has hit all of his targets for the year.
  • A nurse practitioner has a positive attitude and inspires many of her patients.

Your practice might use bonus payments as an incentive to encourage employees to go "above and beyond" and achieve goals. These payments can have a positive impact on the entire practice and increase motivation among all employees. 

Different Types of Bonus Pay

Nondiscretionary Bonuses

Nondiscretionary bonuses are bonus payments included in an employee's regular pay rate for meeting predetermined targets, such as arriving to work on time. (Practices should include nondiscretionary bonuses in employees' offer letters.) 

The Fair Labor Standards Act (FLSA) mandates that practice managers must include these bonus payments in an employee's base rate of pay for overtime purposes. Employees might be exempt from the FLSA mandate if they receive a fixed salary that doesn't change, receive a minimum weekly amount of $684 (as of 2020), and primarily carry out professional, executive, or administrative duties. 

Exempt employees can receive up to 10% of their salary in nondiscretionary bonuses to meet the FLSA minimum salary requirements. For example, nondiscretionary bonuses linked to profitability or performance. (A billing assistant who has completed all administrative duties within a given time frame.) 

Discretionary Bonuses

Discretionary bonuses are bonus payments paid at the practice manager's discretion.

(Healthcare practices don't include discretionary payments in employee contracts.) They are a variable amount, not a set calculation, and a non-recurring giveaway. An example of a discretionary bonus is a holiday bonus.

There are no federal laws in the United States that govern discretionary bonus payments, and very few of these bonuses are discretionary under FLSA.

How to Manage Bonus Pay in Your Practice

Healthcare practices usually determine discretionary bonus payments on a case-by-case basis. As a result, there is no clear policy for issuing these payments to employees. However, you could communicate discretionary bonus payments in your employee handbook alongside any nondiscretionary bonus payments. Below is an example:

You introduce a bonus payment system for medical administrators in your practice and communicate this policy in your employee handbook. The medical administrators are now aware they could receive nondiscretionary bonuses if they meet all their targets for the year. This communication could encourage productivity among the team and boost morale. 

Final Word

Bonus pay can be a challenge for healthcare practices. Investing in reliable HR software like HR for Health helps you manage both discretionary and nondiscretionary bonus pay in your practice. You can keep track of employee performance throughout the year, issue bonus payments through your payroll system, and calculate overtime for nondiscretionary bonuses. (Not all HR software does this.) 

HR for Health does all the hard work for you. No more complicated calculations. No more fuss. Learn more here.

Did you know that we at HR for Health monitor all the specific laws and regulations that affect your practice? If you have questions about compliance issues, please reach out to us. Schedule a call, call (877) 779-4747, or email compliance@hrforhealth.com now to learn more.