Season of Giving…or Grievances

Bright Smiles Dentistry: Episode 11

The office was already humming with holiday spirit. A small fake tree twinkled in the corner of the reception area, and patients were arriving in bursts of sweaters, scarves, and peppermint lattes.

December was always a complicated month at Bright Smiles Dentistry: patients wanted to squeeze in appointments before their insurance reset, employees were angling for time off, and somewhere in the middle, everyone expected a little cheer.

With holiday pay and time off requests already clarified when handling the Thanksgiving closure in November, Dana turned to the other elephant in the room: how to thank her team without creating chaos in payroll. She’d been leaning toward gift cards… easy, simple, and festive. But when she asked CEDR about it, she got a reality check.

The Right Way to Process Employee Bonuses

“A bonus is a form of compensation; it doesn’t matter how you pay it. Keeping a bonus ‘off the books’ by paying it in cash or in a gift card can lead to a lot of trouble down the line,” the advisor explained. “They’re subject to payroll taxes, which means you’ll need to run the amount through payroll anyway.”

“The easiest thing to do, for everyone, is to let employees know about the bonus they’re getting, and include it in their regular payroll. It can be a separate line item so the amount is obvious to the employee.”

“That makes sense,” said Dana. “Though I already know Dr. Chang won’t love that. He enjoys handing something physical to each team member so it feels more like a gift from him. Can we run a separate bonus check?”

“That’s definitely an option, but we know that payroll companies often charge you for off-cycle checks. Some owners like to hand out flat-sum bonus checks without the taxes showing. Dr. Chang could write the checks and report the amounts to the payroll company so they take care of taxes in the normal pay cycle.”

“But that actually makes payroll more complicated. You then need your payroll company to calculate the taxes from the separate bonus check into the next regular payroll. As a result of the extra taxes, the next regular paycheck will end up being lower than usual. No matter how many times you tell your time to expect it, it’s basically guaranteed they’ll be confused and asking you to explain their paycheck amounts.”

Dana jotted it down, planning out how to approach this with Dr. Chang. “OK, so there’s no perfect option and it’ll come down to what he wants to do. Maybe he can hand each person a card with a written note from him that also tells them to look out for a bonus on their next paycheck.”

“That can be a great compromise for everybody.” The advisor continued, “Of course, there’s another thing to consider when it comes to bonuses – whether they impact overtime pay or not.”

“Excuse me – what?” interjected Dana.

“Since bonuses are compensation, how they’re viewed by the DOL depends on whether the bonus is ‘discretionary’ or ‘non-discretionary.’ Basically, is this an unexpected extra amount you’re giving out, or is this a known bonus opportunity that employees have been trying to earn.”

“Oh, this is just an end-of-year gift that’s totally up to what the doctor decides to do,” explained Dana.

“Perfect,” went on the advisor, “that means it’s discretionary. It has to be run through payroll like any other type of pay, but you don’t have to worry about that overtime component.”

“Can you explain that anyway…” asked Dana.

“Of course. When you calculate overtime, you have to take into account any type of compensation that was earned during that week. So if the bonus was something that was based on set criteria, like a collections goal, then it’s essentially part of your employee’s promised and expected wages. That makes it something they earned and therefore the law makes you add that into the overtime math.”

“Oh, that does sound familiar,” said Dana. “I think you guys taught me that when you did my HR and handbook training. I didn’t quite commit it to memory since we rarely run bonus programs.”

“That’s ok, we’re here to help out if it ever does come up.”

Closing the Year with Confidence and Compliance

Dana hung up, shaking her head at the details she had almost missed. Without CEDR, she might have handed out gift cards, only to discover later she’d created a payroll compliance headache.

Later that week, Dana sat down with Dr. Chang to make a plan for team bonuses. She went through her notes from her call with CEDR and laid out the options for Dr. Chang.

By the time the last patient of the year left and the lights dimmed in the operatories, Dana finally allowed herself to exhale. December had been one long tightrope walk: holiday schedules, time off requests, and the logistics of year-end bonuses.

The holidays hadn’t been perfect. Someone always grumbled about time off. Someone else thought bonuses could have been higher. But Dana had handled it all, step by step, with clear guidance and steady leadership.

Dr. Chang stopped by her office on his way out. “Dana, I just want to say, this year, you’ve done an incredible job keeping the office well-managed. I know it hasn’t been easy.”

Dana smiled, feeling the weight of the year finally ease into something like pride.

As the practice settled into quiet, Dana switched off the lights and grabbed her coat. For the first time in years, she wasn’t dreading January. She was ready for it.