Questions About Employee Incentive Programs
Employee incentive programs are formulated in order to keep the employees motivated
, which would help the company grow. A company may provide various kinds of incentive programs, which may also aid in maintaining an excellent work atmosphere. Below are a few questions that have been answered regarding incentive programs:
Q. What good does an employee incentive program do?
Employee incentive programs aim to motivate or encourage employees to work more/better in order to help the company achieve its goals. It aims at making the employee feel that he/she is a part of the success of the company.
Q. Does an employee incentive program save taxes for the company?
As per the IRC (Internal Revenue Code), Sec. 102 (c), an employee should include all amounts received from the employer as a part of the income. Exceptions to this rule are as follows:
An employee achievement award given for safety achievements or length of service. This award should be in the form of a tangible property
Any gift or award whose value is $25 or less
As a rule, the employer should show the value of the award or gift (cost to the employer) on the W-2 form of each employee who has been given the award. This will be reflected as a taxable compensation. This means the amount is subject to such taxes as FICA (Federal Insurance Contributions Act) and the cost may be deducted on the employers business tax return.
Q. If an employee is on leave, is it an acceptable practice to delay the payment of wages and incentives? Also, if an employee is terminated; can the employer withhold the payment?
Wages and incentives are payments that are made for a job that has been finished. Therefore, the employee may sue the company for wage violation if the company decides to hold back the payments. As per law, the company should clear all amounts due to the employee on the day of termination itself. Therefore, the company cannot withhold a terminated employees payments.
Q. Consider a situation where an employer is paying wages to the employees on an hourly basis. The employees are also eligible for incentives if they achieve the goals set. In addition, the employer is also paying the employees for overtime. The employer is finding this arrangement expensive and wants to find a solution. What solution can an employer find for it?
As per law, the employer has to pay overtime at time and a half to a non-exempt employee with more than 40 work hours a week. The hourly rate that the employer is paying may have gone up because the payment is based on performance targets. This in turn would increase the overtime payment as well. Therefore, the employer may want to consider paying bulk bonuses instead of increasing the hourly rate.
Q. Can non-profit executives of charitable organizations receive profit-based incentives?
As per IRS guidelines, charitable organizations should pay only reasonable compensation to non-profit executives and they may not receive extra benefits. Basically, the amount of compensation that is paid should not be greater than the value of the services given to the organization. Any compensation that needs to be paid should be pre-approved by the deciding authority of the organization. Further, the compensation amount should be decided based on the purpose, budget, and other relevant factors of the organization.
Q. Is it acceptable for a company to give incentives to employees of one department while the employees of another department do not get any incentive?
In the above situation, the employer may have taken into consideration the job profile of employees in either of the departments before rolling out the incentive plan to a particular department. This may be unfair to employees on the department who are not eligible for incentives, but it is not unlawful as there is no
workplace discrimination made based on the employees age, sex, race, religion, or nationality.
Employee incentive programs are voluntarily provided by the employers and it is not mandatory for them to offer it to the employees. However, when these programs are offered, there may be questions that may arise regarding its fairness, legality, and enforcement. Therefore, it is important that both employees and employers know the laws that govern the incentive programs. You can consult an
employment lawyer if you have any further questions about these programs.
by: MeghanJones
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