Legal Definitions - guaranteed annual wage plan

A guaranteed annual wage plan is an employment agreement where an employer commits to providing employees with a specified minimum level of pay or a minimum number of work hours over a full year, regardless of potential slowdowns in business or seasonal variations.

The primary goal of such a plan is to offer financial stability to employees and help employers maintain a consistent, skilled workforce throughout the year.

• Example 1: Seasonal Tourism Business

  A hotel located in a popular beach destination experiences peak occupancy during the summer and significant downturns in the winter. To retain its experienced front desk staff, housekeeping supervisors, and maintenance crew, the hotel implements a guaranteed annual wage plan. Under this plan, these core employees are guaranteed 80% of their full-time annual salary, even during the off-season months when their hours might be reduced due to fewer guests. This ensures the hotel has a trained and reliable team ready for the next busy season.

  This illustrates a guaranteed annual wage plan because the employer (the hotel) agrees to pay employees a "predetermined minimum sum each year" (80% of their full-time salary) regardless of the actual work available during slower periods.

• Example 2: Specialized Manufacturing Plant

  A small, high-precision manufacturing company that produces custom components for various industries often faces fluctuating order volumes. To prevent the loss of its highly skilled machinists and technicians, who are difficult to replace, the company offers a guaranteed annual wage plan. This plan assures these employees a minimum of 1,800 hours of work per year, even if some weeks or months have fewer client orders. If work falls below this threshold, employees are still paid for the guaranteed hours.

  This demonstrates a guaranteed annual wage plan as the employer commits to providing a "minimum number of hours of employment each year" (1,800 hours), ensuring job security and consistent income for its specialized workforce.

• Example 3: Creative Agency with Project-Based Work

  A digital marketing and advertising agency often works on project-based contracts, which can lead to periods of intense work followed by brief lulls between client engagements. To attract and retain top creative talent, such as graphic designers and content strategists, the agency offers a guaranteed annual salary. This means employees receive their full agreed-upon annual salary, paid weekly or bi-weekly, regardless of whether there's a temporary dip in client projects or if a project finishes ahead of schedule, leaving a short gap before the next one begins.

  This is an example of a guaranteed annual wage plan because the agency agrees to pay its employees a "predetermined minimum sum each year" (their full annual salary), providing financial predictability despite the variable nature of project work.