Premium Pay

CSLFRF may be used to provide premium pay to low- or moderate-income eligible workers who performed essential work during the COVID-19 public health emergency. Premium pay is intended to compensate essential employees for heightened risk due to COVID-19. It must be entirely additive to an employee’s regular rate of wages and other compensation and may not be used to reduce or substitute for an employee’s normal earnings.

Who is an eligible worker? Eligible workers are those low and moderate-income employees who work in critical infrastructure sectors, which may include public health, safety, and emergency response staff; social and human services staff; and other state and local government employees who performed essential work during the pandemic.

What is essential work? Essential work is work that (1) is not performed while teleworking from a residence; and (2) involves regular in-person interactions with the public, patients, or coworkers; or involves the regular physical handling of items at work that are also handled by the public, patients, or coworkers.

Who qualifies as a Low- or Moderate-Income Worker? Premium pay must target low and moderate-income employees. To qualify, the employee must either (1) NOT be exempt from the Fair Labor and Standards Act (FLSA) overtime provisions; or (2) the employee’s total wages and remuneration (including premium pay) must be less than or equal to 150 percent of the State’s average annual wage for all occupations or the county’s average annual wage, whichever is higher.

How is premium pay awarded?  A local government may make a premium payment of up to $13 per hour for each eligible employee for work performed during the pandemic. The maximum total per-employee payout is $25,000–this is an overall cap, not a yearly cap. Premium pay may be awarded on an hourly basis, as a lump sum per pay period, as a monthly allotment, as a one-time payment, or according to other similar methods. The only limitation is that the monies must be paid for work already performed. Generally, the governing board must approve any changes to employee compensation, including premium pay, unless this authority has been delegated to another employee. Premium payments must be run through payroll and treated as wages to the employee for employment tax, retirement, and other withholding purposes.

In the Project and Expenditure report, should premium pay be reported as a general government service under revenue replacement category 6.1 or as premium pay under expenditure category 4.1? Initially, Treasury classified premium pay as separate project to be reported as a “premium pay” project under expenditure category 4.1. However, shortly before the April 30, 2022, Project and Expenditure Report was due, Treasury updated its guidance to allow local governments to classify premium pay as a provision of government services and report it under the revenue replacement expenditure category 6.1. In future reports, local governments may choose to report premium pay as either a 4.1 premium pay project or a 6.1 provision of government services project. Importantly, local governments will want to retain documentation to show that those employees who received premium pay qualified as essential workers performing essential work. This documentation must be retained for five years after the unit’s final expenditure of CSLFRF funds.

See Premium Pay for Local Government Employees for additional information on premium pay.