What is Hazard Pay, and Should You Offer It?

You may be wondering what hazard pay means, who’s eligible for it, and if you should provide it to your employees. We have answers to your questions.

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All you need to know about hazard pay during COVID-19

COVID-19 has vaulted hazard pay into the spotlight — and some members of Congress are taking action.

On April 7, 2020, Senate Democrats unveiled The COVID-19 “Heroes Fund,” proposing premium hazard pay for essential frontline workers across the United States through to the end of 2020. According to the proposal, essential frontline workers earning less than $200,000 per year would be eligible for a $25,000 pay increase, also called “premium hazard pay.”

Those earning more than $200,000 per year would be eligible for a $5,000 pay raise. The funds would be provided directly to eligible employers, who would then disburse the money to qualified employees.

Additionally, on May 1, 2020, Senator Mitt Romney released Patriot Pay, proposing hazard pay for essential workers in critical industries. Patriot Pay calls for a temporary bonus of up to $12 per hour, in addition to regular hourly wages, in May, June, and July. Three-quarters of the bonus would be paid by the federal government via a refundable payroll tax credit and the remaining one-quarter would be funded by the employer.

To top it off, some states and cities — e.g. Massachusetts and Vermont — are introducing or considering hazard pay legislation, in light of COVID-19.

With the increased attention on hazard pay, you may be wondering what it really means and whether your small business should provide it. Read on for answers to your concerns.

What is hazard pay?

Per the U.S. Department of Labor, hazard pay is extra pay for doing hazardous work or jobs involving physical hardship.

Per the U.S. Department of Labor, hazard pay is extra pay for doing hazardous work or jobs involving physical hardship. The DOL defines physical hardship as “Work duty that causes extreme physical discomfort and distress which is not adequately alleviated by protective devices.”

Hazard pay is basically incentive pay, since its main purpose is to motivate employees into performing dangerous work or jobs involving physical hardship.

Is hazard pay required by law?

The Fair Labor Standards Act does not require hazard pay. There are also no statewide laws mandating private sector employers to provide hazard pay.

However, there are federal statutes requiring hazard pay for federal employees who perform certain types of hazardous work. As stated in the U.S. Office of Personnel Management’s COVID-19 guidelines, federal employees are entitled to a 25% pay increase if they work with or have “exposure to ‘virulent biologicals’ only when the risk of exposure is directly associated with the performance of assigned duties.”

Also, a few localities — such as Birmingham City, Alabama, and Kanahwa County, West Virginia — mandate hazard pay for specific local government workers.

Which jobs are considered hazardous for hazard pay purposes?

See the federal government’s list of hazardous duties and pay differentials for federal employees.

In terms of COVID-19, essential frontline workers are the most likely to receive hazard pay. Note that the definition of “essential frontline worker” for COVID-19 reasons has largely been left up to individual states. Therefore, definitions may vary by location.

Typically, though, essential frontline workers include:

  • Doctors
  • Nurses
  • Emergency medical service workers
  • Laboratory technicians
  • Pharmacists
  • Community health workers
  • Firefighters
  • Law enforcement
  • Border patrol officers
  • Postal workers
  • Delivery drivers
  • Grocery store workers
  • Food processors
  • Transit employees
  • Janitors
  • Maintenance workers
  • Truck drivers
  • Employees and contractors who work in essential services for the state, local, or tribal government

Should you offer hazard pay during COVID-19?

As a private sector small business, you’re under no obligation to provide hazard pay, unless a statute or employment contract demands it.

But because of COVID-19, many employees want, and are even expecting, hazard pay. According to an article published by The Brookings Institution, millions of employees in services deemed essential are struggling to make ends meet while risking their lives and their family’s health.

From grocery cashiers to housecleaning aides, they fear they will contract the coronavirus on the job and pass it on to their loved ones, some of whom have pre-existing conditions such as asthma. These workers feel they deserve additional pay for the risk they are taking. But that decision is up to their employer.

Industry experts say that hazard pay may be justified if the employee’s job places them at a high risk of exposure for COVID-19 despite the use of protective gear. Hazard pay may also be suitable for employees in public-facing jobs that make it difficult to practice social distancing. Note that employees who work from home aren’t considered essential frontline workers and therefore wouldn’t receive hazard pay.

Though not required, some private sector businesses are offering hazard pay as a way of rewarding employees for working onsite during the pandemic. On April 3, 2020, WorldatWork reported that 26% of surveyed employers said they plan to offer onsite employees hazard pay in response to COVID-19. Specifically:

  • 9% will give cash incentives as a flat dollar amount
  • 9% will offer bonuses based on a percentage of salary or a different formula
  • 8% will provide cash incentives linked to hours and shifts worked

On April 3, 2020, WorldatWork reported that 26% of 267 surveyed employers said they plan to offer onsite employees hazard pay in response to COVID-19.

Alternative perks

Most employers (65%) said they aren’t planning to give onsite workers hazard pay but would instead provide other perks like free meals or daycare options. You might consider this alternative if your employees are working onsite during the pandemic and you’d like to reward them for their commitment without breaking the bank. This will also help you retain valuable workers.

How much is hazard pay?

For federal employees, hazard pay cannot be more than 25% of the employee’s pay.

Regarding COVID-19, private sector employers are offering varying rates. According to Marketplace.org, some grocery store workers are receiving an additional $2 per hour in hazard pay. For some, the hazard pay comes with an expiration date; for others, there’s no ending date. Employers with long-standing hazard pay policies may assign a flat dollar amount, which increases based on length of service.

What goes in a hazard pay policy?

The policy should include:

  • What constitutes hazard pay
  • Eligibility criteria
  • How hazard pay is calculated
  • When employees can expect to receive hazard pay

Employers should administer hazard pay in a nondiscriminatory way — meaning employees in similar situations must be treated equally. Otherwise, the employer could face discrimination charges.

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