Your organization is a small company with 15 employees and therefore does not require you to offer health insurance. However, you give all of your employees additional money each pay period to use toward their health benefits. The amount is earmarked for this purpose on their paychecks, but taxed like regular income. Does this additional benefit money count toward calculating income for compliance with the new overtime rules and minimum salary threshold?
Since the additional amount is earmarked for the specific purpose of purchasing health insurance, the Department of Labor will likely consider the money to be a reimbursement, fringe benefit, or bonus, rather than part of the base salary (they have told us that line items don’t count toward salary). Therefore, it is not recommended to count it when calculating income for compliance with the overtime rule. The same would be true for other allowances, such as money to be used for transportation or cell phone service.
If you want to count the additional amount toward the FLSA salary threshold, it is suggested that you simply do away with the earmarking. You could give the employees the same total compensation without indicating that a certain portion is for purchasing health insurance. The employee will receive the same amount of money, but you’ll avoid any kerfuffle with the Department of Labor. You are of course welcome to communicate to employees upon hire that the salary for the position has been determined with the cost of health insurance (or car or cell phone use) as a consideration.
Should you have any additional questions regarding this or any other HR topic, please contact CyQuest!