Admins with the required permissions can run a bonus payroll if you want to pay a bonus outside your regular payroll—there's no extra fee to do this.
Types of Bonuses
Types of Bonuses
What are they and how do they impact overtime calculations?
There are two types of bonuses:
Discretionary Bonuses
These bonuses are optional, meaning the employer does not have to give them, and there’s no promise or contract to pay them. Examples include:
Bonuses for handling a tough or stressful situation.
Bonuses for unique or extra effort, without set criteria.
Employee-of-the-month bonuses.
Severance bonuses (given when employees leave).
Referral bonuses for employees not focused on recruiting.
Impact on overtime
Discretionary bonuses are not included in overtime pay calculations, per the Department of Labor.
Non-Discretionary Bonuses
These bonuses are known to employees, who may expect to receive them if they meet certain goals or criteria. Even if an employer can choose not to pay it, that does not make it discretionary. Examples include:
Bonuses based on a set formula, like team or individual production bonuses.
Bonuses based on quality or accuracy of work.
Announced bonuses to motivate efficient work.
Attendance and safety bonuses (like after a certain number of days without accidents).
Impact on overtime
Non-discretionary bonuses are included in overtime calculations, as required by the Department of Labor.
Important Reminders
Important Reminders
Know the difference between the types of bonuses.
Taxes
Bonus payrolls default to the supplemental 22% withholding rate per the IRS, but this can be changed, whereas a regular payroll will tax the bonus as regular wages.
For Multnomah County, Oregon employees: For bonuses (and other additional earnings) paid separately from regular payroll, Gusto will default to a 0% tax rate for the Preschool For All Personal Income tax. If the employee wants this tax withheld on their bonus, they can complete the form to opt in with their chosen amount, and you can follow the steps in the OR registration article to enter the withholding amounts.
After the bonus payroll, remember to re-set tax preferences for future paychecks.
Note: If you make a correction to a past pay period, Gusto will not recalculate the past taxes owed. Employees will need to pay any unpaid past taxes directly to the county, outside of Gusto.
Paid time off (PTO)
If you run a bonus payroll during a “work period” where an employee has paid time off (PTO) that has not yet been paid on another payroll, the bonus payroll will include the PTO pay.
To keep the bonus separate from PTO, wait until the PTO is paid in a regular payroll before running the bonus payroll.
Time tracking
Time tracking hours do not sync to bonus or off-cycle payrolls, only regular payrolls.
How To Run A Bonus Payroll (CHECKING FLOW WITH GUSTO)
How To Run A Bonus Payroll (CHECKING FLOW WITH GUSTO)
If an employee has an active garnishment, confirm with the garnishment authority for any specific rules on garnishing the bonus.
Go to Settings → Users → Payroll.
Click Run Off-Cycle Payroll.
Choose the type of off-cycle payroll by selecting Bonus.
Enter a work period.
The timeframe in which the employee worked to earn this payment.
Paid time off (PTO) reminder: If you run a bonus payroll during a “work period” where an employee has paid time off (PTO) that has not yet been paid on another payroll, the bonus payroll will include the PTO pay. To keep the bonus separate from PTO, wait until the PTO is paid in a regular payroll before running the bonus payroll.
Select the payment date.
Select if you want deductions and contributions to be included:
Block all deductions and contributions: We will not make any benefit deductions or contributions.
Important: We're unable to turn off 401(k) deductions and contributions due to the requirements of most plans.
Make all the regular payroll deductions and contributions.
We'll make all your normal benefit deductions and contributions.
If your benefits are managed by Gusto, your standard benefit will not automatically be applied unless you choose them to be included.
Review the Tax Withholding Rates.
If you want to make a change, click Edit next to the Tax withholding rates section.
Select the employee(s) this Bonus Payroll should apply to.
Click Continue.
For each employee, enter the bonus amount as +Gross Earnings or +Net Earnings.
Gross Earnings: The amount of money your employees earned before any taxes and deductions are taken out.
Net Earnings: The amount of money your employees take home after all taxes and deductions have been taken out. This is the money they have in their pocket on payday.
(CHECKING THE PAYROLL FLOW WITH GUSTO FOR BONUSES)
(If needed) Change the payment method to check or direct deposit.
Click Continue
Review and submit the payroll by clicking Submit Payroll.
If you need to make changes, click Edit Payroll.
Close the tab, and return to CleanCloud.
View this payroll and other past payrolls by going to the Pay section and clicking Pay History.