Jump to content

Holidays for Part-Time Exempt Employees


Guest pls
 Share

Recommended Posts

I work for a utility in the midwest and we offer some professional (exempt) employees part-time positions (fridays off, compressed workweeks, etc.) I'm benchmarking how companies handle holiday pay for these type employees. If a person is scheduled M-Th for 32 hours, and a holiday falls on Friday, do they get paid? Do they get an additional day off? Do I just pay them an extra 6.4 hours? If they were scheduled 20 hours per week M-F, I'd just pay 4 hours for the holiday. Problem is these folks are truly exempt and often work many over over their schedule. Any input on how you handle this? Looking for equity and compliance issues. Thanks. pat

Link to comment
Share on other sites

Only one experience: a relative of mine works for an academic institution, and is regularly scheduled for 30 hours per week. She has some flexibility in how tha is done. In her case, she works M-Th: 6/8/8/8, none on Friday. If a holiday falls on a Wednesday (for example), she is credited with 6 hours because that is one-fifth of her regular week. She has to make up the other 2 hours some other way.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

I've only heard complaints about the packages that I'm aware of (e.g., 30-hour per week people complaining that they only got paid for 6 hours on a holiday, while everyone else got 8; compressed 40-hour per week people complaining they had to use 10 hours of a PTO bank; etc.). I can only respond that it is one of many factors that they must consider in deciding whether to work a flexible work arrangement.

I understand that in Europe, some have gone to a very flexible compensation structure. The job is assigned a value and the person decides how much he wants in cash and how much he wants in "benefits" -- including not only pension, health, days off, etc. but almost down to the level of how many pens he or she gets. Not really.... But use of an office is sometimes one of the "benefits" from which to choose. It eliminates some of the discrimination issues (what benefits go to regular full time v. flexible arrangement; married with dependents v. single). It also forces employees to recognize all the costs to their employer. It's not possible to use this here yet, because our tax laws won't allow full use of it (e.g., 401(k) and 125 rules restrict what benefits a person can choose from).

Link to comment
Share on other sites

Katherine,

I have to disagree.

I do not see anything in our tax laws that would prevent the scenario that you say is used in Europe to be used here. And I do not see what limitations you see that would be exampled by 401(k) and 125. All I see is a failure of benefits and compensation plan designs. For example HRAs are getting a lot of press but there has been no change in either the IRC or Treasury Regs. However, HRAs have long been allowed and the IRC change that allowed them was from around 1976. Maybe you would expand further on what you see as limitations in our tax laws.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

For starters, any employer contribution to a retirement plan would become a CODA. Assume an employee is currently receiving $100,000 of income, making a $10,000 401(k) deferral, getting a $3,000 profit sharing contribution and receiving $3,000 accrual to a cash balance plan. For simplicity, assume that under the European structure he would be offered $116,000. If he wanted to elect the same $16,000 of retirement benefits, the entire amount would be a CODA. He would be over the elective deferral limit and even if he could defer the amount, it would be subject to ADP testing and some might be refunded.

Second, I would note that pretax transportation benefits cannot be provided under a Section 125 plan. Only certain types of vacation or holiday pay can be offered as an alternative under a 401(k) plan. Etc.

The flexibility to choose among all benefits and perks without limitation is just not there.

Link to comment
Share on other sites

The fact that transportation benefits are not allowed under section 125 does not stop the benefit from being provided on a tax free basis to the employee. You could use section 132.

A similar situation exists with vacation, pension benefits and other items. There are many ways to skin the cat.

In both your posts you have limited yourself from offering benefits on the false logic that benefits can only be offered either through section 125 or 401(k). This limiting is an example of what I mean by bad plan design. Many things can be offered just as effectively under another section of the code but you can only see that to which you are accustomed.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

I understand 132, too. In fact, the point that I was trying to make was that transportation benefits are under a different code section. But you don't get credit under 125 discrimination rules for an employee's choice of transportation benefits under 132. And you have dollar limits under 132 that you don't have under 125.

The heart of the problem is that we have so many different code sections. Each with their own limits, own discrimination requirements, and various other rules. I'm not saying that there aren't ways to provide many of these benefits pretax. I'm saying that it isn't easy to give each employee exactly the benefits he wants. Europeans have much more flexibility because their tax rules aren't so cumbersome.

I notice you haven't even addressed how to solve the $16,000 401(k) problem I'm describing.

What about this example. Two employees: an officer who has been given a 5% ownership interest and a $200,000 package and another employee making $50,000. Both have over five years of service.

The officer wants to spend $20,000 on retirement benefits and $4,500 on medical premiums and $500 on an FSA and $5,000 on dependent care and $2,400 a year on parking. He wants 4 weeks of vacation and holidays. The employee only wants to spend $1,200 ($100 a month) on transit passes. He'd also like 4 weeks of vacation and holidays, but he doesn't want to take a risk that he might lose some of them at the end of the year.

There are things that you can do to make a some of it work. But you can't make it all work without changing the first rule: that the employee's job has a total value and you're not going to provide any more (e.g., no employer contributions to a safe harbor 401(k) plan). The employee has to buy everything he wants out of those dollars.

I'm not saying the European system is perfect. But in the 21st century, we need to have tax policies that match our diverse work force (more elderly, women and minorities) and the differences in their benefit choices.

Link to comment
Share on other sites

Carfeul what you ask for. An extension of this could be that plan sponsors no longer offer medical coverage for spouses. IMHO, that would be an undesirable trend.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

Why would total loss of the benefit be the outcome?

Under the scenario that I'm suggesting, the insurance benefit would be available. The difference would just be how it affects the person's pay.

It might, in fact, mean that the person who is choosing that benefit has less in total value and less take-home pay, if that is what you are saying. Say two persons are currently making $50,000 and the employer is paying $3,000 of the single's premiums and $5,000 of the married person's premiums (spousal coverage included). The jobs might be revalued at $54,000 each ($50,000 plus the average value of employer provided benefits). So the married person might take home $49,000 cash and the single might take home $51,000 cash.

Fair? Depends on who you ask. There was an article the other day about the growing number of "singles" and the fact that they are generally making less than their married counterparts -- because they don't get as much in those other benefits. If there are discrimination suits, then the benefits could be lost altogether. (E.g., each employee would get $53,000 -- the $50,000 in pay and $3,000 in single insurance). A policy that allows each the flexibility to choose benefits might prevent that.

Link to comment
Share on other sites

aKatherine,

The problem with your above example is that you are making up your own scenario and your own figures which, of course, reflect a negative or "unfair" outcome because that is what your mindset is.

The reason that I did not address your previous 401(k) example was because I felt that you would not understand the tax treatment, and I was right given what you then posted, namely, "But you don't get credit under 125 discrimination rules for an employee's choice of transportation benefits under 132." Aside from the obvious What does discrimination have to do with it at this stage? question, I have to point out that the tax benefits under 132 are no different from those under 125, the employee gets to pre-tax their deduction which in turn reduces the employer's matching FICA, that basically is all there is to it.

Further Re:"And you have dollar limits under 132 that you don't have under 125." This statement in your last post contradicts your previous scenario "The officer wants to spend $20,000 on retirement benefits and $4,500 on medical premiums and $500 on an FSA and $5,000 on dependent care and $2,400 a year on parking. He wants 4 weeks of vacation and holidays. The employee only wants to spend $1,200 ($100 a month) on transit passes." $500 to an FSA is a whole lot less than $1,2000 on transit passes. Since $1200 is always more than $500, What does the dollar limit matter?

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

  • 1 year later...
Guest clareen

We just spent a lot of time researching this. If an employee works Wednesday, Thursday and Friday, and the holiday is on Friday, they get the day off with pay. If the holiday is on a Monday (an unscheduled work day), they do not receive holiday pay.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...