Legal Question in Employment Law in Ohio

Re: Regular Payroll being treated as a bonus

This question should be posed in the tax law/taxation category. The only reason that I can think of for him wanting to do that is if a higher rate of withholding (e.g., a flat rate rather than the usual progressive rate) is applied to the bonus and (though illegal and ill advised), he uses the taxes that are withheld rather than immediately turning them over to the IRS and the state and city taxing authorities. While doing so can get him in deep water in terms of tax liabilities, it would not be your problem. However, you would want to ensure that the proper amounts are being withheld so that you do not get hit with a tax bill come tax time. Perhaps there other tax advantages for him doing so. These are matters that an accountant or tax attorney should be able to address much better than I. One thing that I also would want to know is whether treating the wages as a bonus changes the amount of employer-matched social security payments that must be made (i.e., whether the bonus is included in calculating the amount paid into social security) since the employer must pay around 7.5% out-of-pocket to social security on your behalf (assuming that you receive a W2 and not a 1099 at the end of the year).

From a labor law standpoint, alternatively, the employer may (mistakenly) believe that treating part of your wages as a bonus will reduce the amount that he must pay you if you work more than 40 hours in a workweek. E.g., bonuses, which are entirely �discretionary�, are not typically included in an employee�s regular rate of pay when determining the rate of overtime pay. Your �bonus�, however, is not discretionary and thus, should be included in your regular rate of pay when determining the appropriate rate of overtime pay. Other issues that come to mind regard the effect that classifying your wages as a bonus may have on other employee benefits and/or eligibility. Frankly, I am perplexed (and curious) as to what motivation he might have in reclassifying your earnings, however, I do not practice tax law. Again, you are likely to get much clearer answers in the tax law section. Good luck.