December 18, 2020

Holiday Bonuses - To Give or Not to Give, That is the Question

Snow is falling and the holidays are here. KLC has received several inquiries from cities interested in what limitations they have in giving bonuses especially in light of the pandemic and a wish to show appreciation to our hardworking city employees.

There are both constitutional and statutory prohibitions on bonuses. In general, officers and employees can only be paid for services actually rendered. 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. . . ." This language means that a city may only pay its officers and employees for services actually rendered, and not given any type of bonus.

The statutory prohibition comes from KRS 83A.070 requiring the compensation of city officers and employees to be set by ordinance. Section Three and KRS 83A.070 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.

However, a city may avoid the restriction on bonuses or extra compensation by providing in the compensation ordinance that bonuses or extra compensation may be paid for actual services rendered. The ordinance should also establish the criteria that will govern the decision to pay the bonuses or extra compensation. In that case, the bonus or extra compensation becomes a part of the fixed compensation, subject to the decision of the legislative body to appropriate the funds in the budget ordinance. So if the city appropriates funds and establishes criteria for bonuses and extra compensation to be given for actual services rendered, it can be done.

Examples of this include, all employees who do not miss any sick time will receive a $100; or employees that have worked for the city for five years receive an additional $100, in 10 years they will receive $200 and so on. Another option is to have a local store donate turkeys or hams or gift cards to give to employees.

If you need a sample of this type of ordinance or have any additional questions please contact KLC Personnel Services Manager Andrea Shindlebower Main.