For many years, the issue of whether certain employee perks are – or are not – considered income under the Fair Standards Labor Act (FSLA) has been a source of some confusion for employers. Since the “regular rate” of compensation is the basis for calculating overtime, it’s important that employers are accurate.
In an attempt to clarify that situation, the U.S. Department of Labor (DOL) has announced a new final rule, effective as of January 15, 2020. This update is the first since some 60 years ago, and obviously much has changed. For instance, many employers now offer gym memberships and/or reimbursement for cell phone use. Should those be counted as employee income, thereby increasing the overtime rate?
The regular rate includes all forms of “compensation” paid to a given employee in a work week. The question is: what qualifies as compensation?
The final rule clarifies these questions, stating that, among other things, employers may exclude these benefits from an employee’s regular rate of pay:
- Parking benefits
- Wellness programs, gym access and fitness classes
- Payments for unused sick leave
- Reimbursed expenses including mobile phone plans, credentialing exam fees, membership dues and travel
- Contributions to benefit plans for accident, unemployment or legal services
While those are the highlights, there are other benefits that may be excluded from income as well. Employers should review the new rule and make any necessary adjustments to their rate-of-pay calculations.
Questions about the new rule or other benefits issues? Contact Consolidated Insurance.