Are Those Extra Benefits Wages for Washington Workers?
In administering a claim under the Washington Industrial Insurance Act, the first action usually involves determining the injured worker’s wages at the time of injury. This includes compensation derived from all employment, not just the employer of injury. In addition to their pay, a worker’s wages also include certain benefits. RCW 51.08.178 references an employee’s healthcare benefits, as well as the value of any board, housing, fuel, or other consideration of like nature that is received from the employer as part of the contract for hire. This additional consideration is often paid to the employee as a lump sum.
It can be tricky to determine which lump sums paid to the worker should be included in the worker’s monthly gross wages. The Department defines a “lump sum” payment as a payment to the worker that is not derived from a rate-and-hour calculation. These lump sum payments must then be classified as either a “Bonus” or as “Other Compensation” on the SIF-5A.
A “Bonus” is the most common type of lump sum payment and is defined as a sum paid for services in addition to or in excess of that which would ordinarily be given, and which is closely linked to the work and the wages paid for that labor. To be considered a “Bonus,” the lump sum must be paid pursuant to a contract for hire or paid as consideration for worker performance, and must be included on the W‑2 form.
The other means of classifying lump sum payments on the SIF-5A is as “Other Compensation,” which consists of payments that do not meet the definition of a Bonus but still qualify as part of the worker’s wages under RCW 51.08.178.
While the general rule is that all monetary compensation paid to a worker should be included in their monthly wages, there are, of course, exceptions. For example, employer contributions to retirement plans are not included in the calculation of wages. Also not included in the calculation of a worker’s monthly wages are payments for rewards or recognition, gift cards, Christmas gifts, or Christmas bonuses if they are paid to an employee as a gratuity or gift and are not related to work performance. However, if rewards or recognition, gift cards, Christmas gifts, or Christmas bonuses are paid as consideration for work performance, then they are included in the worker’s monthly wages.
Some common lump sum payments that would be included in a worker’s wages as “Other Compensation” include medical subsidies or contributions by the employer to an employee’s Health Savings Account, cost-of-living adjustments, incentive pay for signing a union contract, shift differentials (if not paid hourly), signing bonuses, shift bonuses, weekend bonuses, and education pay or specialty pay.
If you are calculating a worker’s monthly wages and have any questions about how to classify a lump sum payment, or whether it should be included at all in the calculation, feel free to contact me at or (971) 867‑2724.
Posted by Joe Urbanski.
