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Company retreats and compensation |
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Written by Malcolm MacKillop and Laurie Jessome
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Thursday, 30 March 2006 |
Company retreats can provide many benefits to employers. They often encourage bonding between employees, strengthen loyalty to the company, and provide opportunities for intensive training.
They can also serve as a ‘thank you’ gesture to hard-working employees. However, company retreats also pose several unique challenges, particularly in the area of employee compensation — both during the employment relationship and after termination.
While the individual is still employed, there is the challenge of properly accounting for the reward. The Canada Revenue Agency has issued a policy statement to the effect that “hospitality rewards” such as lunches and trips that are given to employees as thanks or recognition for a job well done are a taxable benefit to the employee and must be reflected in payroll records. Most employers seek to offset the potential tax consequences to the employee by grossing up the value of the trip and absorbing the resulting tax.
Another significant issue is accounting for the value of the trip or retreat at the time of termination. Consider the following scenario: one of your employees resigns to accept another opportunity and, following his resignation, sends a letter advising that he still intends to attend the company retreat. The retreat is scheduled to take place in a tropical location and is made available to the company’s top sales performers. The former employee argues that he has qualified for the trip and is entitled to either attend or receive the value in cash, notwithstanding the fact that he had resigned from his employment.
Your company sees the primary function of the retreat as an opportunity to provide additional training and mentorship to top performers, not as compensation for achieving certain sales benchmarks. Unfortunately, you do not have a written policy setting out the nature and purpose of the trip. Management refuses the former employee’s request and the company is served with a statement of claim seeking the grossed up value of the retreat.
So what are the merits of the former employee’s claim? Is he actually entitled to compensation for the lost opportunity to take the trip? The answer may surprise you. Because your policy did not specifically state that the retreat was a work event designed to train and mentor employees and, further, because achieving certain sales goals is a prerequisite for attendance, the employee has a strong case for the fact that the trip was a bonus rather than a work seminar. Courts in Ontario have held that such work-related trips can constitute an integral part of an employee’s compensation, even where there is a policy that states that you must be an employee at the time of the event in order to attend.
Fortunately, there are some practical steps you can take in order to minimize your company’s risk with respect to such retreats and vacation seminars. First, have a concise and unambiguous written policy that deals with the company retreat. This policy should clearly state the preconditions for attendance, as well as the purpose of the event. Be sure to describe the retreat as a company event that is intended to provide employees with training and mentorship opportunities.
Second, ensure that your employees have been provided with a current copy of your written policy, as it can only be binding upon them if they have been made aware of its terms. Third, when planning the retreat, take steps to make it a meaningful work experience. Schedule seminars that provide training, mentorship, or opportunities for problem solving. If you are going to take the position that it is a work event, it should be planned and executed as such. Attendance at seminars and meetings should be mandatory.
Your written policy should also make it apparent that the opportunity to come to the retreat in the first place is a privilege; not a right. It should clearly state that the scheduling, value, duration and nature of the retreat is entirely within your discretion and may be cancelled at any time and for any reason. Reserve the right to direct employees not to attend wherever appropriate. Finally, the policy should explicitly state that employees who resign or whose employment is terminated for any reason prior to the date of the retreat are not permitted to attend, nor are they entitled to any compensation for the lost trip.
Company retreats have the potential to foster closer ties between employers and employees and can encourage camaraderie and creativity in the workforce. However, as with nearly everything in the workplace, human resources professionals and employers must plan carefully in order to avoid unexpected risk.
Malcolm MacKillop is a partner with the firm Hodgson Shields DesBrisay O’Donnell MacKillop Squire LLP of Toronto. He can be reached at
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. Laurie Jessome is a lawyer with the firm Hodgson Shields DesBrisay O’Donnell MacKillop Squire LLP of Toronto. She can be reached at
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