Bonus to Employees Waiving Health Benefit

June 1, 2008

What if an employee asks for more salary instead of taking a health premium?

Question: What if an employee asks for more salary instead of taking a health premium?

Answer: Well, you can provide an option for a one-year bonus, but you are not required to. This is a benefit you offer out of the goodness of your heart and a desire to retain employees. If an employee doesn’t want it, so be it.

If you decide to pay the cash, you’ll need to offer it to everyone who opts out of the program, not just one employee. And I’d suggest you set this policy at open enrollment when everyone truly does have a choice, instead of mid-year.

You would also want to make it very clear that this is a one-time payment, reflecting their decision to opt out of the program, not a raise in salary. If they opt in next year, bye-bye increase.

You should also do some quick math, looking at the tax consequences of adding salary versus benefits.

I’d also suggest talking to your insurance rep. If you offer this option, more employees may decide to not get insurance, which is an ethical issue, certainly, but also a financial one since most plans get very expensive when you have fewer and fewer employees.