SHOULD EMPLOYEES GET HOLIDAY BONUSES PAID BY THE ASSOCIATION?

By Lanier Coulter, Esq.

Published December 4, 2013

 

Whether or not an association should pay a bonus to a vendor or employee greatly depends on the actual working relationship between the association and the vendor/employee.  Very few associations actually hire employees.   Most associations will hire independent contractors to assist with its day to day operations.   If an association has directly hired a person or persons to work for the association as an employee, then the association can pay a holiday bonus.  For example, if an association directly hires a person to serve as an on-site manager, it can pay the manager a bonus as part of the overall compensation to the manager.

  

However, if an association does not have any employees, but rather has hired vendors as independent contractors, then the question of holiday bonuses is a little different.   First, if the association gives any person a bonus of $600 or more, it must issue a Form 1099 to that person.  Second, an association should be very careful in how it terms any "holiday bonus" that it gives an independent contractor.  Although there are several factors under the law that the courts will look at in determining if an employer-employee relationship exists (thereby exposing an association to potential tax consequences), regularly giving a person a "holiday bonus", whether explicitly tied to performance or not, can be a factor in a determination that an actual employer-employee relationship exists. 

  

For most associations, instead of a "holiday bonus", the safest route is giving a small token of appreciation at the end of the year, that is not attached to a performance review of any sort.   The governing documents for most associations allow for association funds to be used for the common benefit and welfare of the community and issuing a small token of appreciation to association vendors, thereby gaining goodwill, would certainly fall within this allowed use. 

   

When in doubt about issuing holiday bonuses, it is best for an association to consult with both its attorney and tax professional to ensure that there are no hidden consequences. 


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G. Lanier Coulter, Jr. - owner/founder of the firm. He is a 1998 graduate of Oglethorpe University and a 2001 graduate of Emory University School of Law, where he was the recipient

of the Attorneys' Title Guaranty Fund Award.  

 

Lanier is a member of the state Bar of Georgia and the DeKalb County Bar Association.  He is the author of "Don't Wait Until it's Too Late, Statutes of Limitation and How They Can Affect Your Association's Rights" which appeared in Georgia Commons, a Publication of Community Associations Institute of Georgia, Inc.  

 

Lanier practices primarily in the area of community association law.  Lanier assists associations in interpretation and enforcement of their governing documents (covenant enforcement and collection of assessments) and in the negotiation, financing and execution of major renovation and rehabilitation projects.  He is an instructor of continuing education courses for community association managers and attorneys, including, "Dealing With Difficult People," "Problem Solving for Planned Communities," and "Condominium Law." 

 

Currently Lanier serves as a member of the Amicus Committee the Community Association Institute and a member of the Legislative Action Committee for the Georgia for Chapter of the Community Association Institute.  He was the recipient of the 2011 Rising Star Award in the CAI-Georgia Chapter.

Contact Lanier at: glc@coulterlawfirm.net