Creative Benefits

[Guest KimT]

I am interested in letting our employees use their earned vacation time to offset their contribution costs for health and dental incurance premiums next year.

Does anyone know of potential 'tax' or other problems I may face as vacation time is earned income and health insurance is pre-tax? This is a profit organization.

Help!

Thanks, KimT

[mroberts]

The purpose of vacation time is for employees to relax, refresh and recharge. To give employees a financial incentive to not use vacation is going hurt your workforce more than help it. Unless you're in a state that mandates payout of unused vacation, I wouldn't even consider anything but a use it or lose it policy.

Now getting off my soapbox, you could create a cafeteria plan where employees can buy the number of vacation days they want per year. You might want to give everyone 5 days and additional days can be purchased at the employee's rate of pay. Again, I would highly discourage this, but it's always a company's own perrogative.

[Guest jashendo]

You could also just payout unused vacation days after year-end (taxable income, of course), subject, if you wish, to a cap (say, up to 5 days, or 10 days). Since money is fungible, the after-tax net can help employees "offset" their healthcare costs -- better than nothing -- with no administrative costs or responsibilities to you. However, this can also help employees buy a boat, or whatever -- maybe not what you want.