Employer Responsibilities to Exempt Employee’s on Military Leave

Soldier Civilian Veteran

 

For employers who hire active reserve component members into exempt level positions (for a listing of exempt level positions, click here), there are certain salary requirements that employers must meet during an employee’s leave of absence for military duty.

 

Although the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) does not require pay during military leave, a number of companies voluntarily pay reservists the difference between their regular wage and the military pay received during annual training periods. Additionally, some state statutes require pay for public employees during military duty.

 

It’s important to note however, according to the FLSA (for exempt employees) deductions for partial week absences due to military leave are prohibited (29CFR541.602):


“(3) While an employer cannot make any deductions from the pay for absences of an exempt employee occasioned by jury duty, attendance as a witness or temporary military leave, the employer can offset any amounts received by an employee as jury fees, witness fees or military pay for a particular week against the salary due for that particular week without the loss of the exemption.”


In other words, let’s say your exempt employee’s annual training period is set to start on a Thursday of any given week, and your employee works a partial week, they are still entitled to their full week’s salary. As the employer you can opt to pay your employee the difference of their regular salary minus their military earnings.

 

Reservist’s Pay

 

The second piece to this pie is understanding what your reservists get paid in order to determine what salary amounts your employee is owed (if any). 

 

Drill dates are paid out differently than active duty for training (ADT). A UTA stands for Unit Training Assembly.  It is a four-hour period of drill.  A typical drill weekend, a MUTA-4 (Multiple Unit Training Assembly) consists of four, four-hour periods or four days (in one weekend). It’s important to know what your employee is being paid for to avoid any mis-calculations on your end. It is not uncommon to find drill pay and ADT pay lumped together, especially if the training periods were relatively close to each other time wise.

 

Regardless of the type of duty that is being performed, you will find three basic pay categories on a Leave and Earnings Statement (LES) (thats the government’s version of a pay stub): Basic Pay, Basic Allowance for Housing (BAH), and Basic Allowance for Subsistence (BAS). These three items are not all inclusive of the various pays that your employee may receive while on active duty. Also, please note that BAH and BAS are entitlement allowances and not wages.

 

Allowances are the second most important element of military pay. Allowances are moneys provided for specific needs, such as food or housing. Monetary allowances are provided when the government does not provide for that specific need. Most allowances are not taxable, which is an additional imbedded benefit of military pay. In a nutshell, BAH is an allowance to offset the cost of housing, and BAS is meant to offset costs for a member’s meals.


Determining Earnings

 

According to the language of the FLSA: “the employer can offset ANY amounts received by an employee…,” which means employers can use the total of wages and entitlements to determine what the total difference between salary and military earnings would be for their employees. However, according to Elaine Bryant, a HR Knowledge Advisor with SHRM; “when an employer is calculating the supplemental pay they should not include housing allowances and other extraneous amounts as wages.  That is the most generous approach to the employee and the approach that will ensure full compliance with the law [FLSA]. This is one of those areas where either way you go seems like a safe bet, however; consulting with your employment attorney will help to mitigate any liabilities or risk.

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Leave a Reply

  • Aaron Jose
    5 January 2018 at 8:36 am - Reply

    This is the most all inclusive description for reservists pay I have found. I have a question though. I am an exempt employee and a reservist and my employer has a policy to pay me my salary while gone on military leave but offsets my pay after I submit my LES. I am taxed when I receive my full salary, I am taxed when I receive my military pay, when my employer processes my next paycheck with deduction for Millay received it is tax less because of the deduction. My question is, should I get the taxes back that we’re taken out originally?

    For example, I receive $3000 employer pay, taxes are $500. I earn $1500 for half the pay period for which I was on military leave (assuming weekends are not counted because Millay is based on 30 day month.) am taxed $250. I receive my next employer pay at $3000-1500= $1500 and am taxed $250 for employer pay. So in the end my total pay recived is $3000 but I am taxed on $4500 or taxed $750. I believe that the way it is taxed is hurting me in the year end.

    • Ernesto Tamayo
      5 January 2018 at 10:07 pm - Reply

      Hi Aaron,

      Thanks for the question. First and foremost, I’m not a tax consultant, so I would defer any guidance on your particular tax situation to your tax preparation specialist, or your wage earnings to someone at your company’s payroll department. Nonetheless, I’m going to try to point you in a helpful direction. I’m assuming the payments your employer is providing to you are differential wage payments. These are payments made by an employer (other than the Armed Forces) to an individual. They are paid for a period during which the individual performed services in the uniformed services while on active duty. These payments represent all or a portion of the wages the individual would have received from the employer if the individual had been performing services for the employer during that period. Differential wage payments are taxable. To answer your question, no; you shouldn’t get the taxes returned because your differential pay is considered taxable. However, to take this a step further, your employer should be deducting the net amount of the differential wages paid to you from the gross earnings in the pay period you submit your LES (as a pre-tax deduction), as long as the payments occurred in the same tax year, which would prevent you from over-paying income and other applicable taxes on the remainder of your wages. I hope this information helps. Feel free to reach back out with any additional questions.

      Ernie