Several different federal and USVI laws regulate various forms of compensation and benefits. Each social sector organization should adopt a compensation scheme that is compatible with the organization’s mission and furthers its human resources goals.
Most employers — regardless of size — are governed by both federal and state wage and hour laws. Federal and territorial wage and hour laws differ slightly, and employers must follow both. On July 24, 2009, the both the federal and territorial minimum wage was increased to $ 7.25/hr.
The two major requirements in both federal and USVI wage and hour laws concern: (1) payment of the minimum wage and (2) payment for overtime hours. Under the minimum wage laws, employers must pay employees an amount that is at least the statutory minimum wage multiplied by the number of hours that the employee worked in any given work week. Under the laws governing overtime, employers must pay most employees additional compensation for overtime hours.
Minimum wage and overtime laws are not limited to hourly employees. Employees who are paid in other ways, such as by salary or commission, may also be entitled to minimum wages and overtime pay. The minimum wage laws apply to all employees and the overtime laws apply to all employees except those who fall into one of the “exempt” classifications under federal law.
Bonuses can improve employee retention and provide extra incentives for reaching certain targets. Employers who provide bonuses (other than gift bonuses like holiday bonuses) should have a written bonus plan to ensure clarity, and to avoid unintended implied bonuses in contracts. Furthermore, how bonuses are determined and whether they are guaranteed (for example, for hitting certain production goals) or discretionary will also have an effect on calculating an employee’s overtime.
Employers are required to withhold federal income tax and social security tax from taxable wages paid to employees. Under federal and USVI law, funds withheld must be deposited in certain depositories accompanied by a Federal Tax Deposit Coupon (IRS Form 8109) or through the Electronics Federal Tax Payment System (EFTPS). In the USVI, income withholding taxes are paid to the Virgin Islands Bureau of Internal Revenue (VIBIR), and not to the U.S. Treasury. FICA taxes are paid to the U.S. Treasury. For withheld income tax, an Employer’s Quarterly Federal Tax Return (Form 941-VI) must then be filed with the VIBIR. FICA withholding require the filing of a Form 941-SS with the IRS. Both reports must be filed before the end of the month following each calendar quarter. Willful failure on the part of the employer to collect, account for, and pay withholding taxes will subject the employer to a significant monetary penalty, and in some cases will impose personal liability on those responsible for remitting the withholding taxes.
Most employers, including nonprofit organizations that are not 501(c)(3) organizations, must also file an Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS Form 940) and pay any balance due on or before January 31 of each year. Details may be found in IRS Circular E, available at http://www.irs.gov/publications/p15/index.html. Employers who are 501(c)(3) organizations, however, are not required to file a FUTA Tax Return. If payment of tax is required, any balance is due on or before January 31 of each year. Details may be found in IRS Circular E, available at http://www.irs.gov/publications/p15/index.html and in Publication 15A, available at http://www.irs.gov/pub/irs-pdf/p15a.pdf.
Under USVI workers compensation laws, all employers with one or more employees must provide worker’s compensation insurance for their employees. What this means for employers is that an employee who is injured while performing work for the employer cannot sue the employer for his/her injury, but is compensated through worker’s compensation. (http://www.michie.com/virginislands/lpext.dll?f=templates&fn=main-h.htm&cp=vicode) for additional information regarding the USVI workers compensation laws.
Employers must contribute to an unemployment compensation fund. When an employee is granted unemployment compensation benefits, whether those payments are counted against the employer’s account depends on various factors. Generally, an employee is eligible for unemployment benefits if he did not voluntarily leave his or her job and was not terminated for misconduct. (Go to: http://www.michie.com/virginislands/lpext.dll?f=templates&fn=main-h.htm&cp=vicode) for additional information regarding the USVI unemployment insurance laws.
Other USVI Laws
Unless the employer is a company receiving benefits under the Economic Development Authority (the “EDA”), USVI law does not require any particular job benefits other than the payment of minimum wages. This means that the law does not require that employees receive a certain amount of paid time off, whether for vacation, holidays, or sick leave. If benefits are provided, there is no requirement on how they are administered as long as they are not administered in a non-discriminatory fashion. USVI law also does not require that employers provide any disability or medical insurance benefits. However, if such benefits are provided, the plans may be subject to ERISA, COBRA or HIPPA. See summaries of those laws in “Federal Law” section below.
Federally Mandated Benefits
See summaries of ERISA, COBRA and HIPPA in the “Federal Law” discussion below. If applicable, these federal laws mandate certain specified benefits.
Mandatory Leave of Absence
Several federal laws either require or govern leaves of absence, depending upon the reason for the leave. Although these leave laws can be very complicated, application of the laws usually depends on the size of the employer, and some of the more complicated laws do not apply to small employers.
With certain exceptions, the federal Family and Medical Leave Act (“FMLA”) requires employers with 50 or more employees to provide unpaid family or medical leave of up to 12 weeks in a 12-month period for the birth or adoption of a child, for the serious health condition of the employee or spouse, parent or child of the employee, or for a qualifying exigency arising out of the fact that a spouse, child or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in the support of a contingency operation. A “serious health condition” includes inpatient hospitalization and subsequent treatment therefore and continuing treatment by a health care provider, including pregnancy. To be eligible for FMLA leave, the employee must have worked 12 months or longer, performed at least 1,250 hours of service for the employer in the 12 months prior to the date of leave, and must work at a site within 75 miles of which the employer has 50 or more employees. If the employee’s need for leave is foreseeable, the employee must provide his or her employer with 30 days notice before taking leave. When the need for leave is unforeseeable, the employee is required to provide notice as soon as practicable.
The benefits listed below are not required by law. However, many employers choose to provide employees with such benefits in order to attract and retain the most qualified workers.
An employer is not required to provide employees with retirement benefits, welfare plans, severance pay, or other voluntary benefits. If an employer does establish such plans, however, they are governed by a federal law called the Employee Retirement Income Security Act (“ERISA”). See “Federal Law” section below. Under ERISA, employee benefit plans must comply with numerous and complex procedural requirements.
An employer is not required to provide employees with vacation pay. If an employer elects to provide such benefits, however, they should be uniformly applied in conformity with a written policy. This will provide protection against claims of discrimination and may be necessary to ensure the employer complies with the pay provisions of the Fair Labor Standards Act (“FLSA”) as it relates to “exempt” employees.
Although it is not uncommon to do so, employers are not required to give employees paid holidays. Indeed, except in cases where accommodation of religious holidays might be required, employers are not even required to give employees time off during holidays.
Employers are not required to offer paid sick leave to employees. Traditional sick leave is often limited to time off for dealing with the employee’s own illness or possibly to care for a sick child or spouse. Upon termination, the employer has no legal obligation to pay out unused sick leave, which means the employer’s written policy will control.
Many employers choose to combine vacation, sick leave, personal days, and floating holidays into a single “paid time off” or “PTO” policy. This makes it easier to administer employee time off and a single policy for accumulating and using PTO will often suffice.
Paid leaves of absence, such as paid maternity or paternity leave, are not required by law.
The provisions in this section may not apply if an employer is a USVI company receiving benefits under the EDA.