Outten & Golden: Empowering Employees in the Workplace

Post-Hurricane Opportunities for Employers to Do Good: Leave Time

October 5th, 2005 | Paula Brantner

While last week, I spoke about some of the ways the hurricane-spawned disaster in the Gulf Coast region was being used to harm workers, there is not universal cause for pessimism. There are also many positive things that employers and their employees have been doing and continue to do, both to directly support those affected by the storms, and to enable their employees to lend their support as well. Chief among those efforts is allowing employees to take leave (or its pay equivalent) to assist hurricane victims.

Directly Supporting Employees Who Volunteer

Many individuals, when hearing about the disaster or learning of its impact on family and friends, found their first impulse was to go to New Orleans or other affected areas and directly assist those affected. It is clear that many of the organizations providing disaster relief, such as the American Red Cross, could not have accomplished the massive amount of assistance provided without thousands of volunteers from across the country.

Since many of those individuals have jobs, it’s also clear that a number of American employers supported the effort by providing leave, whether paid or unpaid, to those choosing to assist with the relief effort. The Family & Medical Leave Act does not require employers to offer leave, even unpaid leave, to assist with a disaster. Even in a situation where an employee is assisting a family member, unless the family member being assisted has a medical condition, there is no right to leave.

Despite the lack of any legal requirement, however, according to a recent survey, nearly 20% of employers are allowing employees to take leave for the purpose of assisting those affected by the storm. (See Syracuse Post-Standard article.) In a survey recently conducted by the Society for Human Resource Management, about 8 percent of the 340 employers surveyed were providing paid time off to employees helping with relief efforts, while another 11 percent were allowing workers to take unpaid leave.

Converting Leave Time to Cash

Even if you can’t travel to the Gulf area (or if you work for the remaining 80% of employers who are presumably not allowing leave to be taken), you may have a bank of leave time that you never get a chance to use. Perhaps you’re healthy and never take any sick days, or you don’t get around to taking your full vacation time each year. You may have time but no money accumulated to help, or you’d like to do more than you’re already doing. If you would like to use some of that leave time to help victims of Katrina and Rita, the IRS is making that possible — with your employer’s cooperation. (See Monterey County Herald article.)

Through the end of 2006, the Internal Revenue Service will allow employers to deduct as a business expense cash payments made to a qualified non-profit organization assisting victims, when those payments are made pursuant to a leave donation program. Here’s how it works: you tell your employer that you would like to donate some of your accumulated leave. Your employer then makes a cash payment equivalent to your salary for the donated time. (For example, if you make $10 an hour, and donate one day (eight hours) of leave, your employer would need to make an $80 payment.)

Your leave balance is reduced by the donated amount, and the employer can deduct the donated amount (as well as any amount it chooses to match or donate) as a business expense or charitable deduction. You don’t get taxed on the amount you would have been paid otherwise, but you also cannot claim the amount as a personal charitable deduction: the money is considered the employer’s donation for tax purposes. Your employer also does not have to pay employment taxes (as it would otherwise have to do if you took the leave time normally) on the amount donated through this process.

All of this, of course, is dependent on your employer allowing this use of accumulated leave. The employer is not required to set up any special program or obtain IRS permission, and it can be operated in conjunction with current payroll and accounting systems. It’s a relatively painless way for both employers and employees to work together to assist hurricane victims, that doesn’t disrupt the workplace, so it seems like most employers would have an interest in participating. For more information, see the IRS FAQ page on leave donation.

How you use your leave time is up to you, once you have permission to take it. There are undoubtedly many employees out there who have donated their vacation time without obtaining permission for this specific purpose. However, employers who specially facilitate their employees’ efforts to rebuild the region by permitting leave to be used deserve praise. And now that the IRS has announced the leave donation program, there is no reason why any employer cannot do their part, as they can now reap the benefits of their employees’ generosity.

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