Employers provide supplemental earnings to workers in addition to the annual salaries. Supplementary salaries can include things like:
Supplemental salaries are subject to specific tax requirements as an addition to the basic pay plan. Employers may be required by law to withhold tax on supplemental pay differently than ordinary wages. Withholding tax from supplemental pay is based on the following:
If the overall sum of supplementary earnings provided each year exceeds $1 million, the employer is compelled to withhold tax at the greatest rate allowed by federal law.
If the wages are less than $1 million, the level of tax withheld is determined by whether the supplemental payments are paid with normal salaries or separately.
Supplemental wages are a significant aspect of payroll, even if they don’t make up the majority of a payment package. Understanding supplemental wages can assist employers in ensuring that employees are paid on schedule. Building committed employees as well as maintaining employee retention requires ensuring that employees receive their whole income—both regular and supplemental compensation.