"Wages" means all remuneration paid for services rendered by an individual, including commissions and bonuses and the cash value of all remuneration paid in any medium other than cash. Gratuities customarily received by an individual in the course of his employment from persons other than his employer and reported by the individual to his employer shall be treated as wages paid by his employer. The reasonable cash value of remuneration paid in any medium other than cash shall be estimated and determined in accordance with rules prescribed by the board. The value of room and board, if set by agreement between the employer and employee, must be reported as wages. Where there is no agreement, the department uses the minimum values assigned to room and board as established under the wage and hour program.
Types of Payments are not Considered Wages
By statute, the term "wages" shall not include:
A) The amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of:
i) sickness or accident disability (but, in the case of payments made directly to an employee or any of his or her dependents, this subparagraph shall exclude from the term "wages" only payments which are received under a workers' compensation law); or
ii) medical or hospitalization expenses in connection with sickness or accident disability; or
B) Any payment on account of sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after the expiration of six calendar months following the last calendar month in which the employee worked for such employer;
C) Any payment made to, or on behalf of, an employee or his beneficiary (i) from or to a trust described in section 401(a) of the United States Internal Revenue Code which is exempt from tax under section 501(a) of the United States Internal Revenue Code at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust, or (ii) under or to an annuity plan which, at the time of such payment, is a plan described in section 403(a) of the United States Internal Revenue Code;
D) The payment by an employer (without deduction from the remuneration of the employee) of the tax imposed upon an employee under section 3101 of the United States Internal Revenue Code;
E) Any amounts received from the federal government by members of the National Guard and organized reserve, as drill pay, including longevity pay and allowances.
The state law uses similar language as found in the Federal Unemployment Tax Act and for many years, the types of payments excluded under both federal and state law were the same. Currently, federal law excludes some types of payments from the definition of wages under federal laws that are not excluded in state law. A common example is federal law excludes payments made under a Section 125 Cafeteria Plan from the definition of wages. Any payment excluded under the federal definition that is also not excluded under state law must be reported as wages. State law also provides that if federal law changes so that one or more of the payments currently excluded under both state and federal law is no longer excluded under federal law, then state law automatically no longer excludes those same types of payments.