This is an excerpt about employee benefits from my soon to be published book, “The Big Business Law Book for Amateurs”

Hiring and Employee Benefits

Hiring an employee can be as simple as just hiring someone. However, for higher-level employees you might consider putting at least a minimal employment agreement in place.

The employment agreement should at minimum cover the wage or salary to be paid, and a description of the job duties of the employee. I usually advise that the job duties be detailed enough to track compliance, but not so detailed as to preclude asking the employee to do other tasks related to the employment. As an employer, you never want to hear, “Not in my job description” from an employee.

A key employee, that is, someone hired for their exceptional skill set or experience, may want a guaranteed term of employment, such as one year, especially if they relocated for the job. Put the terms for this employee in a written contract. The contract will sometimes guarantee payment for that time period, provided the employee produces as expected.

When it comes to employee benefits, the very general rule is that if you promise a benefit (such as a certain number of days off per year), you have to honor it. The benefit is considered part of the compensation which induced the employee to come work for you.

Granting and Rescinding Employee Benefits

Benefits cannot be retroactively rescinded. That is, if the employee has earned it, they get it. For example, you cannot tell them they get five days paid vacation a year, then when they try to take their five days you tell them you changed your mind.

That said, benefits can be rescinded prospectively. That is, going forward from a certain date, the benefit can be rescinded or modified. Past, earned benefits must be honored though.

When it comes to setting out employee benefits, specificity is always better than generalities. I just finished working with an employer that promised ten paid vacation days per year. He had an employee that quit in her 13th month and demanded he pay her the full second year’s unused ten vacation days, because she was in her second year. He should have stated the policy more clearly, for example, “Employee will earn 1.2 paid vacation days after each month’s employment.”

Digging deeper into just vacation days, because that’s a very common benefit, the time-off policy may state that unused vacation days are forfeited at the end of each employment year. Or not. Maybe you’ll allow the employee to bank unused vacation days. Or bank up to 15 unused vacation days but not more.

Other kinds of employee benefits may include paying for employee training or license fees. “Wellness” benefits are becoming popular. If you want to do profit sharing or bonus plans with your employees, set out the plan and let them know what they have to do to get the rewards.

Conclusion

The broader point is that as an employer, you can define the non-wage benefit you’re giving to your employees in any way that you want.

Contact and More Information

For this and any other business law questions, call me at (312) 671-6453 or contact me at palermo@palermolaw.com. I’ll be sure to let you know when the book is available.

In the meantime, check out these other interesting blog posts:

Board of Directors for Your Corporation: Statutory Authority

Corporate Documents Review Plan