How To Give Your Employees a Bonus This Year Using PTO Buyback
Looking for a way to help your employees make a dent in their student loans, PTO buyback is an effective way of decreasing their monthly payments and wasting less money on interest.
The holiday season is upon us and it’s the perfect time to offer your employees a bonus. But you may not know what type of bonus would be best for them, or how to pay for it. Paidly can help! We can set up a PTO Buyback program for your company so that employees can take part in a tax-free paid time off (PTO) buyback program that offers a lump sum payment to their student loan debt with their left over accrued vacation days. It’s an easy way to incentivize employees while helping them save money at the same time.
What is PTO Buyback?
PTO Buyback is a program that allows employees to convert their unused Paid Time Off (PTO) into cash in lieu of accrued PTO. With a Paidly Benefit Employees can choose to use the PTO they have not used from this year or from previous years and turn it into a lump sum student loan debt payment for themselves at the end of the year. For example, if someone has 100 hours of unused PTO from this year, they can have the employer convert those 100 hours into a lump sum extra payment to their student debt. If you're an employer and want to offer your employees a bonus for being awesome, this is one way you could do it.
PTO Buyback Bonuses can be a great way to help your employees pay off student loans. We’re not saying that you should use PTO Buyback Bonuses as an excuse to give your employees a bonus, but we are saying that it’s a great way to help your employees have more money in their pockets each month to spend on things like student loan payments.
Why Should I Offer A PTO Buyback Program To Employees?
Americans on average leave 33% of their vacation on the table (Minogue, n.d.). The top reason being they feel guilty because they may already be working from home and because no one can take over the work they are already doing. So you might be asking yourself how this helps me as the employer? Under the CARES Act employers are now able to give up to $5,250 of tax-free money to employees by utilizing a 127 plan.
Employee retention is the key to success. When employees leave, there are usually a number of reasons why they do so. You can't know what they are, but it's safe to assume that employee compensation is always one of them.
- A PTO Buyback Program creates an incentive for employees to stay on with your company and continue growing with you long-term. This also gives them another reason not to go work somewhere else because they have something extra in their pockets that many other businesses don't offer: an option for receiving extra pay for taking less than the full amount of PTO when they need it most.
- Employee engagement means more productivity and better performance from everyone within your organization as well as increased job satisfaction overall. Which can then lead directly to higher levels of loyalty among both current staff members as well as potential hires who could otherwise be swayed elsewhere by lower wages or benefits packages offered at competing companies looking for talent below market value pricing models
Tax implications for the employer
How great would it be to help your employees pay off their student loans with pre-tax dollars? It's convenient and easy – and the reward to them will be great.
If you've already thought ahead about this and pre-allocated monies towards this, like so many others, you're ahead of the game! What better way is there to show your employees with student debt that you understand what they are going through? by jumping on this benefit allowing them to take advantage of this tax-free money and thus reap a larger reward. Current buybacks are taxed and thus the individual sees less than they would if it was put towards student loans.
The IRS Section 127 plan allows employers to offer PTO buyback bonuses to help employees pay off student loans. This can be done in the form of a tax-free bonus, which will go a long way toward helping employees reduce their student debt. With this plan, an employer can pay up to $5,250 per employee per year tax-free.
Why should you consider offering PTO buyback to your employees?
If you haven’t considered a PTO buyback or cash-out here is why you should. For forward-thinking companies, employees are the greatest commodity for an organization. We need to show those employees that we value their time and their sacrifice. If an employee is willing to forgo taking vacation so that productivity stays high or to hit deadlines we should show them our appreciation. Outside of bonuses one easy way to do this is PTO conversion to student loan debt.
This is a win-win for both parties as the monies become a tax-free payment. Decreasing the burden on the organization as well as giving the employee more money towards their student loan debt. If an employee had 10,000 outstanding on a loan with 6% interest with a $112 monthly payment; you could save them over $2,500 of interest and knock off almost 5 years of that loan payment.
Send the payments directly to the student loan servicer
We're excited to help you provide this benefit to your employees.
Paidly can help you not only with facilitating these PTO conversions or bonus payouts to student loan debt but also provide sample 127 plans, sample tweets and social media posts to help promote this offering to your employees and future employees. This has helped many of our clients with recruitment and retention. Get started today, or reach out and someone from our team of experts will be in touch to answer any questions or provide you a demo.
The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Paidly shall have no liability for the information provided. While care has been taken to produce this document, Paidly does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.
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