What types of payments to employees are considered supplemental wages?

Author: Rena Pirsos, XpertHR Legal Editor

Supplemental wages are payments made by an employer in addition to an employee's regular wages. Wages that vary from pay period to pay period (e.g., overtime, commissions, bonuses and reported tips) are always treated as supplemental wages, even if they are the only payments an employee receives. Supplemental wages may also be paid without regard to any particular pay period.

Supplemental wages include the following payments:

  • Tips;
  • Bonuses;
  • Back pay;
  • Commissions;
  • Overtime;
  • Noncash fringe benefits;
  • Sick pay paid by a third-party agent of an employer;
  • Income related to the exercise of nonstatutory stock options;
  • Severance pay;
  • Awards and prizes;
  • Retroactive pay increases;
  • Nondeductible moving expenses;
  • Medical loss ratio rebates attributed to an employee's pre-tax contributions for health benefits;
  • Excess deferrals to health flexible spending accounts; and
  • Expense allowances paid under a nonaccountable plan.