Paying fellow employee for vacation time

[jjandjab]

Hi all,

So I noodled around on Google for something about this situation, but didn't see anything jumping out.

I am an employed radiologist as is my "partner". We commonly switch weeks around to cover for each other an create larger blocks of time off. It always works out well and had for years. However, my partner gave his notice to move to a new job and I have covered a few weeks for him and he "owes" me work. He has a bunch of PTO hours but can't use them during his notice period - which seems odd, but guess that's normal for employment law.

Anyway, he really doesn't want to make up the work if he can avoid it and wanted to pay me for the work. But since we are employed I cant' figure out how this would be reported. It would be great to call it a "gift" and be done with it - pay me the equivalent of two weeks salary. I understand this would be sketchy if anyone ever looked deeply into our finances (although I doubt it for a one time mutually agreeable thing) since it really isn't a gift.

But what would you call it and how could it be done completely legally?

[Peds]

If it's <15K it really doesn't matter.

[Dreamgiver]

It’s called cold hard cash my friend! That’s the simplest thing. If you want to get more complicated I guess you could report it as miscellaneous income.

[spiritrider]

There is no payment for consideration here, so it is not compensation. In fact you are the one with the extra income from working the extra weeks.

I don't see there is anything to report unless the amount goes over gift tax reporting limits. It is simply a parting appreciation gift.

Personally, I wouldn't be comfortable receiving the full amount. Maybe more like half

[jjandjab]

Interesting comments thus far. As radiologists, we earn about 15k per week before taxes and benefits. So I'd be OK with the post-tax, pre-benefit amount. That would like be 20k or so, above single year, per person gift tax level, but could potentially be split to me and my spouse... Have to consider this as other folks weigh in...

[SerrateAndDominate]

If he is wanting to pay you back and you didn't earn more for covering him (I'm assuming salary, paid time off, and he can "cash out" of any leftover time off), then it's reasonable to get compensated. Post-tax sounds perfectly reasonable, but I'd let him come up with a number in order to maintain a good working relationship.

[Zaphod]

Just remember that its awesome in the first place they even consider paying. They certainly dont have to, and if you made extra money, what you lost is time. If you didnt make more, then yeah that sucks. Many would say 'big deal' and hope to never see you again (bad strategy). Nothing wrong with being gracious and accepting something else, it is indeed gravy.

[jjandjab]

Zaphod wrote:

Just remember that its awesome in the first place they even consider paying. They certainly dont have to, and if you made extra money, what you lost is time. If you didnt make more, then yeah that sucks. Many would say ‘big deal’ and hope to never see you again (bad strategy). Nothing wrong with being gracious and accepting something else, it is indeed gravy.

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SerrateAndDominate wrote:

If he is wanting to pay you back and you didn’t earn more for covering him (I’m assuming salary, paid time off, and he can “cash out” of any leftover time off), then it’s reasonable to get compensated. Post-tax sounds perfectly reasonable, but I’d let him come up with a number in order to maintain a good working relationship.

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To be a bit more clear - we work 7on-7off and have traded weeks in the past such that by the end of the year it all evens out - we have a great working relationship and have for 4 years. He's leaving for family reasons.

I have been working the past 5 weeks (3 of mine and 2 of his) based on our usual good-faith trading of weeks, which we have done many times. I have only been paid my usual bi-weekly salary while he has also been paid as usual -we don't bother to get HR involved to change up the pay.

So at this point I was not compensated extra at all by anyone. But now he would prefer not to work the 2 weeks he "owes", but would rather pay me. Hospital has locked down his extra PTO time so he can't use that. Only options are that he works the weeks or we figure out a legal way to have him compensate me. And I have just been unsure if he can just write a check.

[Zaphod]

Hmm...bad faith on his part. Make him work or get what you can. Him working is easiest solution. He should have known ahead of time about leaving and Im sure did...

[ZZZ]

"15k per week before taxes and benefits. So I’d be OK with the post-tax, pre-benefit amount. That would like be 20k"

First, what value is assigned to an extra week worked if run through HR? He owes you 2x of that.

If 15k/wk is the going rate, I'd quibble with your math. That # should put you in the 37% bracket, plus 2.35%, plus your state tax rate if any).
So, 30k * (60.65 - state income tax rate) = fair amount owed

[VagabondMD]

I would be happy with an envelope containing 100 Benjamins, but start the negotiation higher.

While it is less than the true value, he could easily just walk away, and you would have no recourse.

[jjandjab]

ZZZ wrote:

“15k per week before taxes and benefits. So I’d be OK with the post-tax, pre-benefit amount. That would like be 20k”

First, what value is assigned to an extra week worked if run through HR? He owes you 2x of that.

If 15k/wk is the going rate, I’d quibble with your math. That # should put you in the 37% bracket, plus 2.35%, plus your state tax rate if any).
So, 30k * (60.65 – state income tax rate) = fair amount owed

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I quibble in return. I work 26 weeks, 7 days a week, at that pay rate (and also do some extra locums), but I'm nowhere close to the 37% rate which is for 2018 in on income over 600k per year married. So I teter on the 32-35% bracket for my highest tax bracket and my effective tax rate is far lower, especially post-Trump cut. So a ballpark of 33% with state tax is much closer to accurate.

[q-school]

it only matters what you two feel is appropriate.  the ranges we are talking about will fall into the gift and no external tax implications range for you and spouse.

whether you decide 1500, 2000, 2500 per day is up to you two.  no right or wrong answer.

 

 

[ZZZ]

"I quibble in return."

Fair enough. I figured the "we earn about 15k per week" implied 780k. I stand corrected, I didn't realize there were radiology jobs where you worked that much and still ended up in the 32% MFJ bracket.

Your math is still bad. Both you and your partner earned that money at your top marginal rate, not your effective rate. Even if you ended up in the 32% bracket this year, that extra 30k pretax you for the two weeks of work, if it had hit your paycheck would have been 30k - (32% fed + 2.35% medicare + either 5% taxachusettes or 8.75% VT state rate, we'll use the lower), that's still 39.35% effective marginal rate so 18,830.

And, as Vagabond said, I wouldn't push too hard, as he could just as easily hang it up and leave you with nothing.