One idea that attracted a lot of attention at the third annual Kingdom Business Workshop in Denver was the development of caring funds to address needy and disaster situations for employees.
James Ruder of L&R Pallet talked about the idea and how it changed their approach to meeting employee needs. Ruder explained, “This approach puts employees on the giving end of things instead of just receiving.”
By switching roles this has changed employees’ attitudes about benevolence and empowered them to help each other. The owner and management can also give and help match as needed. In addition, the company offers “Caught You Caring Awards” that recognizes employees who go above and beyond to serve each other or customers.
Instead of employees facing needy situations coming to the owner for help, they can let their fellow co-workers know who can then nominate them to receive assistance funds or items. The L&R Caring Fund is fairly simple. Employees can give $1 or more per pay period to the fund.
Only people who give to the fund are eligible to vote in who can receive it. L&R’s Care Team does have the discretion to give funds in special circumstances even to those who are new or did not contribute for a legitimate reason.
The money is collected in cash and stored in the vault. The production supervisors and front-line workers take requests for funds, investigate the need and then vote on it in production meetings based on employee feedback. Money can be used for disasters or basic necessities of employees going through major life events.
When you start changing culture and focus on caring more for workers, it can create an atmosphere where some employees will try to take advantage of the owner or managers. But the employee-based caring fund removes this sense of obligation from the owner having to meet every need by providing a vehicle for workers to help each other. Yes, the company or its owners can and likely should contribute. But this can also complicate things from a tax perspective.
From a tax perspective, money donated by employees is after taxes so there is no real tax burden concern associated with the recipient as long as the amount does not exceed $15,000 in value (2018 gift tax exclusion exemption limit). But any funds provided by the company itself is considered income and will be reported as wages. However, the amount will be grossed to cover payroll taxes.
His Way at Work (HWAW), a ministry focused on Christian business principles in the marketplace, has developed a White Paper on the topic of Benevolence Funds. It states, “The Benevolence Fund is composed of voluntary employee donations and matched by the company in a multiplier. The fund is used to support colleagues in financial need due to an unexpected event.”
The company should establish basic criteria for eligibility, such as employment status, types of emergencies or life events that qualify for consideration, who makes the decision, etc. Usually a Caring Team, comprised of front-line workers and some managers, evaluate and vote on requests. HWAW suggests that employees are not allowed to submit themselves for consideration and should not contribute to their own collection efforts.
Money should not be used for non-essential or luxury items such as cable TV, credit card payments, fancy appliances, etc. Also, funds should not go to debt consolidation or litigation (bail). Failure to properly manage their money is not a reason for consideration. However, the company may provide financial counseling services in these situations.
Some companies with large workforces may want to establish a private charity that would enable donors to receive tax deductions for their contributions. But this can be expensive, and it is usually not advisable for small to medium-sized businesses.
While the company can establish criteria and protocols for collection, evaluation and disbursement, owners or managers should not use the fund as a way to provide bonuses, incentives or show favoritism to preferred workers. HWAW suggests that the Caring Team manage the process. In some cases, companies will choose to keep the identity of the person secret from those who are voting to ensure impartiality. They will merely evaluate the requests based on the facts and the merits of the situation.
Local tax and other laws can vary. So, anything you do should be reviewed with your accountant or tax professional. Caring is a good thing, but you don’t want it to get you or your employees in trouble with the Internal Revenue Service. Most money or items dispersed through these Benevolence Funds are a few hundred dollars up to $1,000. These structures are not meant to be insurance or replace lost tangible assets.
For more information on how best to establish a program that can help your workers, consult www.hwaw.com.
Editor’s Note: Nothing in this story should be considered tax or legal advice. Consult your tax specialist or accountant to see how you can best set up a Caring Fund.
