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I work for Company XYZ as consultant, but my work location is at client place as contractor.

My employer that is Company XYZ, filed labor (LCA) for 100k, but as I work as contractor my pay depends on client payment. So now client is paying 150k to my employer.

My employer is running salary for only 100k and he its need to be in according to LCA. He pays remaining amount 50k as bonus at the end of year.

My questions: 1) Does it benefit the employer in any way if he is paying as bonus i.e like saving some company taxes?

2) I have been told if my company pays all my amount 150k as salary then company can not make tax benefits .i.e they can make tax benefits if they pay as bonus to employee.

I am in US.

Plz help me to understand

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    What country does this pertain to? – Hart CO Jun 2 '17 at 23:35
  • @ Hart Co I am in USA. – user2683098 Jun 2 '17 at 23:59
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I don't believe there exists a tax-advantage for paying employees a bonus instead of increased salary. It's all expense to the employer, it's all income to you, and it's taxed the same (bonus checks might have more withheld, but your end of year tax burden doesn't change).

It does benefit your employer to delay a significant portion of your pay until the end of the year, delaying payment provides buffer in case of delays in getting paid by the client. Your employer could even put the extra money to work earning more money over the year.

It would depend on your contract, but are you due your bonus if you were to leave your job before year-end? If not, that's a great reason to delay payment, because it makes you less likely to leave mid-year, and should you not work out they can keep the difference.

  • +1 for describing contractual obligations... that's not something many people think about. – 1234567 Jun 3 '17 at 3:11
  • @Hart Co, Thanks for quick replyWell, I have been told "if employer pays employee as bonus, then employer can show as business expenses. This way by showing as expenses he can say tax." Is this correct ? – user2683098 Jun 3 '17 at 21:04
  • All pay is an expense to employers, whether it's via wages or bonuses. Maybe there's some context that would make more sense out of their claims, but I can't think of any reason why they'd think there was a tax implication. Perhaps it's just an excuse. – Hart CO Jun 3 '17 at 21:12

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