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In the Payroll Mailbag …

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in Office Management,Payroll Management

On-call pay conundrums

Question: In addition to their hourly pay, our company wants to pay employees who are off but on-call a flat amount of $60 for an entire day and $30 for a night. We set up an earnings code for the on-call pay, which will add the flat amounts to their regular pay without involving overtime. How is the regular rate calculation affected when they’re called in and they work overtime?

Answer: If you’re asking whether the on-call payment must be included in employees’ regular rate for overtime calculation purposes when employees are called into work, the answer is yes.

In addition, the long-standing rule is that by paying employees to remain on-call, you are suffering or permitting them to work, regardless of whether they’re called into work. Those payments are payments for time worked and must also be included in their regular rates for overtime calculation purposes.

Tread carefully with executive pay

Question: The company’s CEO purchased a disability insurance policy with his after-tax income. His contract with the company states that he is entitled to be reimbursed, up to $1,000, for his premiums. Since he’s the owner and purchaser of the policy, is the $1,000 reimbursement taxable income, which should be handled through payroll?

Answer: You could handle it through payroll, but if the company reimburses the premiums, the premiums would be attributable to employer contributions, and the benefits would be taxable. If the CEO was not reimbursed, the disability benefits would be tax free, because he paid for them with after-tax dollars. His status as a corporate office probably isn’t relevant, but it could be if the company is an S corporation. You should check this out with your corporate tax department.

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