Google Grants Gay Workers Higher Pay to Make Up for Tax Disparity
Google has announced that, starting this week, gay and lesbian employees in the United States will be given a higher rate of pay to compensate for the tax disparity they face when claiming health insurance benefits for their same-sex domestic partners when compared to Google’s married heterosexual workers.
From the New York Times:
On Thursday, Google is going to begin covering a cost that gay and lesbian employees must pay when their partners receive domestic partner health benefits, largely to compensate them for an extra tax that heterosexual married couples do not pay. The increase will be retroactive to the beginning of the year.
“It’s a fairly cutting edge thing to do,” said Todd A. Solomon, a partner in the employee benefits department of McDermott Will & Emery, a law firm in Chicago, and author of “Domestic Partner Benefits: An Employer’s Guide.”
Google is not the first company to make up for the extra tax. At least a few large employers already do. [Cisco, Kimpton Hotels and the Gates Foundation are among those businesses who cover the extra tax.] But benefits experts say Google’s move could inspire its Silicon Valley competitors to follow suit, because they compete for the same talent.
Under federal law, employer-provided health benefits for domestic partners are counted as taxable income, if the partner is not considered a dependent. The tax owed is based on the value of the partner’s coverage paid by the employer.
It is estimated that, on average, Google’s gay and lesbian employees used to pay $1,069 per year more than their fellow married employees who had identical coverage. The article notes that this change in Google’s policy came about after employees specifically brought up the issue and highlighted the extra financial burden they faced. Google, who in the past has made a formal statement against California’s gay marriage ban, known as Proposition 8, in which it specifically mentioned that the company opposed the ban because of the effect it would have on its employees, has now responded with this change.
It is worth noting that the increase will only be given to same-sex partners as, although gay and lesbian couples can now get married in certain states, the federal Defense of Marriage Act (DOMA) prevents the government from recognizing these marriages as being valid and therefore can not grant them the estimated 1138 benefits marriage provides. Heterosexual domestic partners, on the other hand, can avoid the added tax by marrying and therefore Google will not be granting them this additional pay. The change will be applied retroactively and backdated to January 1 of this year.
There is a hope that this change could create a ripple effect in Silicon Valley as other companies, particularly those who are in competition with Google or are in affiliated industries, consider making similar changes in order to remain competitive.
On this latest change, Google’s vice president for people operations, Laszlo Bock, said: “It will cost some money, but it was more about doing the right thing.”
Last year, analysts for the New York Times calculated that, over a lifetime, not having access to the 1138 benefits that marriage grants heterosexual couples could cost same-sex partners between $41,196 and a staggering $467,562 over a lifetime.