Holiday Bonuses: Public employers have restrictions

Avoid prohibited holiday bonuses

Many employers want to provide a holiday bonus to show their appreciation for employees and help offset the cost of the expenses at the end of the year. However, public employers have restrictions that prevent this gesture. Section Three of the Kentucky Constitution provides, in pertinent part, that, “no grant of exclusive, separate public emoluments or privileges shall be made to any man or set of men, except in consideration of public service,” meaning a city may only pay its officers and employees for services actually rendered. Additionally, KRS 83A.070 requires the compensation of city officers and employees be set by ordinance. These two provisions prohibit a city from giving any bonus, gift or extra compensation to city officers or employees over and above that which is fixed in the ordinance setting their compensation.

A city may avoid the restriction on bonuses or extra compensation through inclusion of fixed, additional compensation in the pay and classification ordinance for actual services rendered. The ordinance should also establish the criteria that will govern the decision to pay the bonuses or extra compensation. The most common example is a longevity award: employees that have worked for the city for five years receive an additional $100, in 10 years they will receive $200 and so on. Keep in mind, all taxes and other withholding, including retirement, would need to be taken out of any additional compensation and included in the calculations for overtime.

With questions, contact KLC Municipal Law at 800.876.4552.