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Can I offer contests that involve referral bonuses in Pennsylvania? What are the requirements?

Referral Bonuses in Pennsylvania

Under Pennsylvania law, referral bonuses are generally allowed as long as they meet certain requirements. The Pennsylvania Department of Labor and Industry considers referral bonuses to be a form of non-wage payment, which means they are not subject to state income tax withholding or unemployment compensation taxes [2].

However, it is important to note that referral bonuses involving federally related mortgage loans are prohibited under the Real Estate Settlement Procedures Act (RESPA) Section 8(a) [3]. This means that any referral bonuses offered in connection with mortgage loans that are insured by the federal government, such as FHA or VA loans, are not allowed.

To ensure compliance with state and federal laws, referral bonuses must meet the following requirements:

  • The bonus payment is not made according to any prior contract, agreement, or promise causing an employee to expect such payments regularly.
  • The bonus is discretionary, meaning it is not guaranteed or promised in advance.
  • The bonus is awarded to employees who made unique or extraordinary efforts not awarded according to pre-established criteria.
  • The bonus is not tied to the sale of a particular product or service [1].

In summary, referral bonuses are generally allowed in Pennsylvania as long as they meet the above requirements and do not involve federally related mortgage loans.

Source(s):
Jurisdiction

Pennsylvania