The employer cannot count the lump-sum payment toward its overtime obligations. Moreover, the payment will increase the amount of overtime compensation due to the employees.

Premiums paid for weekend or holiday work may be counted toward FLSA overtime compensation only when they are based on the number of extra hours worked. Payments made without regard to hours cannot be used to offset statutory obligations. In addition, the payments must be included in employees’ regular rate of pay when the employer calculates overtime compensation that is due.

The lump-sum payment also means that the employer cannot use the “fluctuating workweek” method for overtime-pay calculations. Under this method, the parties agree on a fixed salary regardless of the number of hours, and the employer will owe only an addition half-time for hours worked in excess of 40 during the workweek. There is no fixed salary because of the extra payments for Saturday work.

In effect, the lump-sum payment is an incentive or production bonus rather than an overtime premium. Bonuses that do not relate to hours worked may not be credited against overtime-pay liability. Lump-sum payments may be useful tools in some situations, but employers should be aware of potential consequences.