09-27-2023 Council Packet - Laserfiche WebLink

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RELEVANT LINKS: League of Minnesota Cities Human Resources Reference Manual 12/2/2022 Benefits Chapter 5 | Page 6 B.Employee recognition awards and employee social events LMC information memo, Public Purpose Expenditures. MN Office of State Auditor: Employee Recognition Programs and Events. Minn. Stat. § 15.46. MN Office of State Auditor: Statement of Position, Employee Recognition Programs and Events. The League has historically taken the position cities can sponsor and pay for employee recognition programs (including social events such as employee picnics or holiday parties) if they are structured so they constitute part of an overall employee compensation program. The Attorney General has taken a narrow interpretation of the term compensation and suggested the term means only monetary compensation. In 2007, state law permitted cities to establish and operate a program of preventive health and employee recognition services for its employees. However, the Office of the State Auditor issued guidance in 2011 to the City of Dayton that seems to question expenditures for employee picnics or holiday parties. Cities wishing to provide employee recognition programs should consider the following: •Take formal action to adopt a program, preferably well in advance of any actual expenditures, using language specifying the program is adopted as additional compensation for work performed by the employees. •Develop a well-thought-out and modestly priced program applicable to all employees who meet certain conditions. For example, “all employees who reach 25 years of service will receive a plaque thanking them for their dedicated years of service to the community.” Or, “all regular full-time and regular part-time employees will be invited to attend the city’s summer employee picnic to thank them for their work throughout the year.” Each city council should decide whether it believes these types of employee benefits promote a public purpose and serve the best interests of the citizens of their community. A good argument can be made that such expenditures are a natural incident of the employer/employee relationship and the authority for such expenditures is implied as part of the authority to compensate employees. IRS Publication 525. With respect to taxability for various recognition awards, the IRS has requirements for length of service awards. Among them, the awards cannot be given prior to the employee’s fifth anniversary of employment with the city. Also, the city may not award the employee another length of service award during the year or the previous four years. An employee achievement award must be an item of tangible personal property, and it must be given to an employee for his/her length of service or for some safety achievement. The circumstances surrounding the award must also demonstrate the award is not likely to be disguised pay. Attachment 4 - HRRM Benefits - Extract