Run a bonus payroll (for admins)

There are two types of bonuses (according to the Department of Labor).

1. Discretionary bonuses

Optional and not promised to employees.

Examples:

• Reward for handling a tough situation
• Recognition for extra effort (without set rules)
• Employee-of-the-month
• Severance pay
• Referral bonus for non-recruiters

Overtime impact

Not included in overtime pay calculations (according to the Department of Labor).

Setup

• If given regularly, add as a recurring payment for hourly or salaried employees during regular payroll.
• For one-time payments, create a “custom earning” and pay it in a separate bonus payroll.

2. Non-Discretionary bonuses

Expected by employees when goals or rules are met. Even if an employer can choose not to pay it, that does not make it discretionary.

Examples:

• Based on a set formula (team or individual production)
• Quality or accuracy bonuses
• Announced bonuses to encourage performance
• Attendance or safety bonuses

Overtime impact

Included in overtime pay calculations (according to the Department of Labor).

Setup

Add as a recurring payment for hourly or salaried employees during regular payroll.

Taxes on bonus payrolls

• By default, taxed at 22% supplemental rate per the IRS (can be changed).
  • Adding a "bonus" to a regular payroll will tax the amount as if it were regular wages.
• Multnomah County, OR: Defaults to 0% for Preschool For All tax (on separate bonus payrolls) unless employees opt in on this form, and update their Oregon W-4 in Gusto. 
  • After the bonus payroll, employees may want to reset their tax preferences for future payrolls. 
  • Gusto does not recalculate Multnomah County taxes if corrections are made to past payrolls—employees must pay any owed taxes directly to the county.

Before running a separate bonus payroll

• Know which bonus type you’re paying, and how you can set it up in Gusto.
• Confirm garnishment rules for bonuses if the employee has wage garnishments.
• Time tracking does not sync with bonus payrolls (or off-cycle payrolls).

How to run a bonus payroll (for one or more employees)

1. Sign in to Gusto.
2. Go to Pay.
3. On the right side of the page, click Run a Bonus Payroll.
4. Select employees (search, filter, or checkboxes).
5. Click Continue.
   • Click Edit employees if you need to change who is getting a bonus.
6. Enter a "Work Period" (dates the bonus covers).
7. Choose a "Check Date".
8. Choose a bank account (if you have more than one setup).
9. Decide on Deductions and Contributions:
   • Block all deductions and contributions: We will not make any benefit deductions or contributions. 
     • Important: We cannot turn off 401(k) deductions and contributions due to the requirements of most plans.
       • For integrated 401(k) with Guideline, Betterment, Human Interest, Vestwell, or other partners, Gusto cannot turn off integrated deductions due to 401(k) requirements.
       • For 401(k) plans managed outside of Gusto, we recommend updating your employees’ 401(k) elections.
   • 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 benefits will not automatically be applied unless you choose them to be included.
10. Review "Tax Withholding Rates", or click Edit rates (if needed).
11. Enter bonus amount as either:
    • +Gross Earnings – the amount earned before taxes/deductions
    • +Net Earnings – the amount the employee takes home after taxes/deductions
12. Choose "Payment Method" (check or direct deposit).
13. Click Save & Continue.
14. Review the wages and taxes. If everything looks good, submit payroll. If you need to make changes, click Go back.
15. If paying by check, you'll need to print and deliver it to the employees.

After running a bonus payroll

You’ll get a confirmation email. You can view past bonus payrolls and other past payrolls in Pay > View Pay History.