TN 36 (12-23)

RS 02505.030 When We Consider Special Wage Payments (SWP) Earned

A. SWPs paid before the employment relationship terminates

The following chart explains when to consider certain SWPs earned if paid before the employment relationship terminates.


When to Consider SWP Earned

Type of Payment

Month of Absence

Month of Payment

Month for which Paid

Advances Against Commissions

     Services in current year







     Services in prior year






Annual or Sick Leave

(Federal, State or Local)








Back Pay — Statutory

(see RS 02505.240B.5.)








Back Pay — Non-Statutory

(see RS 02505.240.B.5.)








Bonus - Occasional

(Defined in RS 02505.030C)








Bonus - Part of Regular Pay (Defined in RS 02505.030C)








Deferred Wages
















Holiday Pay








Idle-Time Pay








Payment in lieu of vacation

    Services in current year







    Services in prior year






































Teacher pay for non-work months












B. SWPs paid at the time or after the employment relationship terminates

Consider wage payments earned in the last month the employee worked unless the employee performed the services in a prior period.

Consider the services performed in a prior period when:

  • The beneficiary reports that the payment relates to services performed in a prior period;

  • The Program Service Center has a precedent relating to this;

  • A written plan or contract shows the payment was for or computed for services rendered in a prior period; or

  • The payment was available for the beneficiary's immediate use at some prior time. In such cases, consider the services rendered in the year the payment became available for the beneficiary’s immediate use.

C. Explanation of terms

Consider the following explanations when payments include bonuses.

1. Occasional bonuses

Consider a bonus occasional if both the fact of the payment and the amount are determined at the sole discretion of the employer at or near the time of payment.

2. Bonuses which are a regular part of pay

Consider a bonus to be a regular part of the employee's pay if it is:

  • Paid pursuant to a prior contract, agreement, or promise causing the employee to expect such payments regularly; or

  • Announced to induce the employee to work more steadily, rapidly, or efficiently or to remain with the firm.

D. Examples

1. A bonus as a regular part of pay

Before the school year begins, the school board makes an agreement with substitute teachers that they will receive a $500 bonus for every thirty days of substitute teaching. Since there is a prior agreement and the school board uses the bonus as an inducement to continue substitute teaching, consider the bonus as a regular part of their pay.

2. Vacation pay

Bill Jones arranged to work January through May 2012 and then retire. The employer pays them $2500 in lieu of vacation. Bill's union contract provides for a vacation credit of four weeks for services rendered in the prior year. The contract also provides for crediting additional days of vacation in the year of retirement. Therefore, in Bill's year of retirement, they are eligible for one additional week's vacation, giving them five weeks’ vacation, three of vacation time, when they retire. The question becomes when did Bill earn the $2500 they received in lieu of vacation. Since there is a written plan that shows that they rendered services for $2000 of the payment in 2011, consider the $2000 earned in 2011. Consider the remaining $500 of the vacation pay earned in 2012.

3. Sick pay received weekly or monthly

Ben Brown becomes ill on 05/06/2011 and does not return to work. Consider the employment relationship terminated as of 05/05/2011. They receive sick pay through 12/31/2011. Sick pay for the first 6 months after 05/2011 are wages, but we charge the wages to 05/2011, their last month of actual work. Exclude sick pay for the seventh month after 05/2011 from wages under section 209 of the Act. The non-service months are 06/2011-12/2011.

4. Lump-sum payment

A beneficiary retires in April as specified in the employer's plan, and they receive a $10,000 lump-sum payment for accumulated unused sick leave. The lump-sum payment is not “wages” for earnings test purposes. For information on retirement pay and income that is not wages for earnings test purposes, see RS 01402.326 and RS 02505.045.

If the employer's plan provides a lump-sum payment of accumulated unused sick leave when the employment relationship terminates and the plan does not specify retirement as a condition, consider the wages for earnings test purposes and count in the last month of employment.

5. Teaching contract

A beneficiary’s contract to teach school from September through May provides for equal monthly payments from September through August. The employment relationship terminates in May. The beneficiary attains age 62 in June and applies for reduced retirement insurance benefits. We count the salary the beneficiary receives for June, July, and August in May, which is the last month of employment.

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RS 02505.030 - When We Consider Special Wage Payments (SWP) Earned - 12/21/2023
Batch run: 03/08/2024