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Can an Employer Offer a Lottery-Style Bonus Program

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  • 04-24-2018, 12:56 PM
    McLawsalot
    Can an Employer Offer a Lottery-Style Bonus Program
    My question involves labor and employment law for the state of: Michigan

    I have a new bonus program I'd like to start up where I would offer my employees bonuses for helping me out when I'm in a bind. The bonuses would could be anywhere from $5-$500, and are based on a "POT" of available cash. This "POT" is funded by the company and by the staff, so the amount available in the"POT" can change all the time.

    The concept of this bonus program is a lot like a lottery. Many people pay in small amounts and one person gets the entire "POT".

    My question is a two parter:

    1. I understand employees would need to voluntarily opt-in for this type of program and have a way to opt-out. However, is there anything I need to be concerned about other than having written consent from my staff to start a program like this? i.e. ERISA requirements, IRS reporting, any reporting requirements.....

    2. Since the concept of this program is similar to a lottery, are there any concerns I should have about using the word "Lotto" or "Lottery" in the advertised name of this program?

    FYI: My employees are all W2 employees.

    Thanks!
  • 04-24-2018, 03:07 PM
    PayrolGuy
    Re: Bonus Program
    The part about funded by the staff is illegal on likely several levels.

    Anything you pay your employees would be considered wages.

    This sounds exactly like a lottery with money added by the company. You can't legally run a lottery. Running one where the employees are required to play (and you can say it is opt in but no government agency is going to buy that) just makes it worse.
  • 04-24-2018, 03:10 PM
    hr for me
    Re: Bonus Program
    umm... good luck getting any employees to voluntarily contribute. Why would they put in money that they themselves might not get back if they aren't the one to help you out? I've never played the lottery because it is a tax on fools. Your setup would be the same.

    If you want to motivate employees, there are much better ways to do so! No one is going to go above and beyond at the chance of a $5-500 payout.
    http://open.lib.umn.edu/organization...ce-incentives/


    I'd suggest seeing a local attorney about your scheme, but it's probably not worth the $s you would pay to have him/her laugh at the idea.
  • 04-24-2018, 03:13 PM
    PayrolGuy
    Re: Bonus Program
    Unfortunately a lot of people are stupid enough to play this and regular lotto. And there are a lot of employers who might try such an obviously illegal idea. Right up until some disgruntled employee or former employee reports them to the state or feds.
  • 04-24-2018, 03:51 PM
    Taxing Matters
    Re: Bonus Program
    Quote:

    Quoting McLawsalot
    View Post
    My question involves labor and employment law for the state of: Michigan

    I have a new bonus program I'd like to start up where I would offer my employees bonuses for helping me out when I'm in a bind.

    If your business is regularly in a “bind” then depending on exactly what that bind is perhaps you should not be in business. If the problem is simply irregular cash flow then do what other businesses do to cover that problem: get a line of credit from a bank or other commerical lender where you can borrow money when the cash is tight and then repay when the cash becomes flush later. If the problem really is poor profit margin then you may simply be in the wrong business or not the sort who should be running a business. You should never need your employees to contribute back to help your business out of a “bind.”

    The exact details of what you propose to do matters, but you certainly run the risk here that you either violate the laws against illegal gambling or violate the laws on employee pay. I strongly suggest you consult an employment law attorney in your state to discuss your idea before you implement it. If you do something that ends up being illegal that could really cost you.
  • 04-24-2018, 03:56 PM
    PayrolGuy
    Re: Bonus Program
    TM I don't think he is talking about a financial bind. At least I didn't get that from the OP.

    I think he means being overly busy and an employee(s) going above and beyond to help.
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