Few employers are aware that if they continue paying the salary of a disabled employee without a written Qualified Sick Pay Plan (or QSPP) in place prior to the disability, the payments they make lose the deductibility as a wage expense. This will be considered as an “ad-hoc” sick pay plan, and few people are aware of the adverse potential on the business.
In addition of the issue of deductibility of the continued salary to the disabled employee, a precedent is created and a subsequent disability of a non-key employee may result in the claim that the prior payment obligates the employer to pay this second individual.
A QSPP or salary continuation plan is simply the written description of who is covered, how long they must be disabled before payments are made, how much is payable, how long the benefits are payable and what constitutes disability or inability to work. LifeGuy.com can provide you with complimentary sample legal documents needed to implement a QSPP.
While the QSPP or salary continuation plan can be self insured by the business, employers will find that it’s wise and more economical to insure a sick pay plan for pennies on a dollar, with a quality disability insurance – group plan or individual plans for each key employee.
Contact us today to discuss your Sick Pay or Salary Continuation plan. 239-LIFE-GUY or Insurance@LifeGuy.com