When a company counts new full-time employees to qualify for Nebraska's LB 775 (Employment and Investment Growth Act) tax incentives, how many hours does a salaried worker count for?

Plain-English summary

Nebraska's Employment and Investment Growth Act (LB 775) gave companies tax credits partly based on how many new employees they added. To measure that, the statute counts people in "equivalent employees of forty hours per week" -- it converts the hours paid into 40-hour-a-week units. That is easy for hourly workers, but a salaried worker is paid a fixed amount rather than by the hour. This ruling explains how many hours a salaried worker counts for.

The core rule: a salaried employee is counted using "the number of hours that the employer has established as the regular workweek for a full-time hourly employee." A salaried worker is treated as a full-time employee for any period in which the full salary is paid.

The mechanics, from the ruling:

• Prorating below 40 hours. Because the statute measures in 40-hour equivalents, an employer whose regular full-time week is shorter than 40 hours must adjust. The ruling's own example: if the regular full-time week for hourly employees is 36 hours, each salaried worker is considered to have worked 36 hours, which converts to nine-tenths (0.9) of a 40-hour equivalent employee.
• Extra work. A salaried worker counts as having worked more than the normal week only when the pay for that period is proportionally increased because of the additional work. If the salary is not proportionally increased, only the regular hours count.
• Paid time off. A salaried worker is treated as having worked a full week during periods that include vacation, compensatory time, or sick leave, as long as the full salary is paid for the period.
• Partial pay. If a salaried worker receives only part of the normal salary for a period, the hours counted are in the same proportion to the regular week as the amount paid is to the full salary.

What this means for you

Employers claiming LB 775 (Employment and Investment Growth Act) credits

Do not automatically count every salaried worker as one full 40-hour employee. Count them at your established regular full-time workweek, then convert to 40-hour equivalents. If your standard full-time week is under 40 hours, each salaried worker is worth less than one full equivalent employee (0.9 at a 36-hour week), which affects your new-employee count and the credit tied to it.

Payroll and HR staff tracking headcount

The salary must actually be paid for the period to count it. Vacation, comp time, and sick leave count as full weeks when full salary is paid; a partial-salary period is prorated; and extra hours count only when the worker is paid proportionally more for them.

Accountants and advisers modeling the incentive

Because the calculation runs off the employer's own definition of a full-time week, two companies with the same salaried headcount can have different equivalent-employee counts. Document the regular full-time workweek used and the conversion math, and confirm the current LB 775 successor statutes, which have changed since 1987.

Common questions

Q: How many hours does a salaried employee count for under LB 775?
A: The employer's established regular full-time workweek for hourly employees, treated as a full-time employee for any period the full salary is paid.

Q: What if our full-time week is less than 40 hours?
A: You prorate. The statute counts in 40-hour equivalents, so a 36-hour regular week makes each salaried worker nine-tenths (0.9) of an equivalent employee.

Q: Does a salaried worker on vacation or sick leave still count?
A: Yes, as a full workweek, as long as the full salary is paid for that period. If only part of the salary is paid, the hours are prorated.

Q: When does a salaried worker count as more than a full week?
A: Only when the pay for the period is proportionally increased because of additional work. Otherwise only the regular hours count.

Citations and references

• Nebraska Revenue Ruling 29-87-4, "Economic Development Tax Incentives -- Salaried Employees Considered Full-time Employees (Employment and Investment Growth Act - LB 775)" (Nebraska Department of Revenue, issued September 1987; approved by State Tax Commissioner Donald S. Leuenberger).
• Neb. Rev. Stat. § 77-4103(9), R.S.Supp. 1987 -- number of new employees determined "by converting into equivalent employees of forty hours per week the number of hours paid for the time periods" (as quoted in the ruling).

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr298704_salaried_employees.pdf

Source-quality note: This ruling survives only as a low-quality scan, and the machine-extracted text below is heavily garbled in places (headings and the signature/date block especially). The holding, the 40-hour-equivalent conversion, the 36-hour/nine-tenths example, and the paid-time-off and partial-pay rules are legible and are the basis for this summary.

Original ruling text

Revenue Ruling 29-87-4

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Economic Develo
u

-t me

ent Tax lncentives -- Salaried Em
ees.

IE

Considered

wt

NS ID RE

HE NUMBER OF HOURS THAT THE EMPLOYER HAS
ESTABLISHED AS THE REGULAR WORKWEEK FOR A FULL-TIME
HOURLY EMPLOYEE.
VE

Advice has been requested as to determining the number of hours to be
used for a salaried employee for the purposes of the Employment and
Investment Growth ,Act in calculating the number of new employees.
Section 77-4103(9), R.S.Supp 1987-, provides in part that:

Number of neî employees
by converting into
equivalent employees of forty hours per w"ãk the
number of hours paid for the time periods

A salaried employee will be considered a full-time employee for any time
period for which the full amount of the sarary is paid. when the
employer does not use a forty hour workweek for determíning full-time
employment, then the number of salaried employees must be füjusted to

determine eguivalent employees.

Ð

For example, ¡f the regular full-time work week for hourty employees is
thirty-six hou rs, then each salaried employee will be
io lLave
worked
"onrid"."d
hours
a
week.
When
converted-to
equívalent
employ-thirty-six
ees of .forty
hours a week, each salaried employee will be nine-tenths of
an equivalent employee.

A salaried employee will be considered to have worked more than the
normal work week of the employer only when the amount paid for the
comParable period is proportionally increased because of the additional
work performed. lf the amount of the salary' is not f roportionally
increased, then only the regular number of hours will be 'included. Á
s.ala.ried employee will be cãnsidered to have worked a full workweek
d-uring periods that include vacation, compensatory time, or sick leave
if the f ull salary is paid for the period.
lf the salaried employee only receives a portion of the normal salary
for a particular time period, then the number of hou"s worked
will be ¡;
t!'re -same proportion to the regular work week as the amount paid is to
the full salary.
A

D

S. Leuenberger

.Þ

State T ax Commissioner
Septembe, Uft, lgBT