supplemental pay

Supplemental pay is payments made to employees in addition to their normal pay. Supplemental wages are given outside the regular wages and include bonuses, commissions, overtime pay, severance packages, sick leave payments, awards, and tips. The additional pay isn’t part of an employee’s regular salary, and it plays a key incentive role by enabling workers to work harder and attain desired job targets. 

Regular pay includes a contracted hourly or monthly salary an employee receives. According to the IRS, supplemental wages aren’t subject to normal taxation, and specific outlines and rates are available concerning taxation on the same. However, employers can cluster overtime payments and tips as part of regular wages.

It’s important for HR practitioners and leaders to factor in the key role supplemental wages play when motivating workers. A basic pay structure that includes supplemental wages and a good income boosts the work culture in any setting.