The chilling case of the Christmas ham

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A December evening in the big city. A light snow was falling, and it was already dark.

ome-where outside, a lonely saxophone played “Silent Night.” The notes drifted through the cold air like fast food wrappers blown out of the garbage cans.

I was working late, trying to get enough billable hours in to take a few days off at Christmas. I was putting the finishing touches on a motion to dismiss when the phone rang, shattering my concentration like Brett Favre shattering another passing record. I turned from my computer, rubbed my eyes and picked up the receiver.

“Hello, how can I help you?” I answered.

“I’m glad you’re still there,” said the voice on the phone. “I need your advice.”

It was one of my best clients. He was a decent guy, always worried about taking too many chances and ending up on the wrong side of the law. In my business, that’s a good thing.

“How can I help you?” I offered.

“It’s the Christmas ham,” he answered.

“A ham?” I asked.

“Yes. Or turkey.”

“Is it a turkey or a ham?”

“The employee gets to decide.”

I sighed. “I think you have some explaining to do.”

“My dad always believed in doing something for his employees at the end of the year,” he explained. “So, starting when he founded the company 40 years ago, every Christmas he would give every employee a ham.”

“… or a turkey.”

“Yes.”

“Nice benefit,” I observed.

“Yeah, well, now I’m in charge of it,” he continued. “The company has grown and times have changed. It’s gotten hard to coordinate. Used to be that a ham was a ham.

Nowadays, there’s honey-baked ham, black forest ham, hickory-smoked ham, Smithfield ham, Virginia ham …”

“Those are quality hams,” I said. I heard my stomach rumble.

“… Plus we have a growing number of vegetarian employees. You know how hard it is to find soy hams?”

“Almost as hard as they are to eat,” I mused.

“Point is, everyone wants something different,” he said. “Some want ham, some want turkey … this time of year I feel like I’m running a deli counter instead of a warehouse.

It’s become a hassle.”

“So you want to get rid of the ham?” I guessed.

“Not exactly,” he replied. “What we want to do is give every employee a $25 gift card for the grocery store. Then the employee can buy their own ham.”

“Or turkey.”

“Or whatever it is the employee eats,” he explained. “The employee can buy 25 bucks worth of frozen pizza if that’s what makes him happy. Regardless, from the company’s perspective, everyone gets the same thing, we have a lot of time and resources and I don’t have to stress about it.”

“I understand why you’d want to do that,” I said. “But going from a ham to a gift card does create other problems. If you give your employees cash or a cash-equivalent, like a gift card, it would be considered wages. And you’d have to deduct from their paychecks the taxes owed on the $25. The ham or turkey, on the other hand, is a de minimis benefit.”

“A de minimis benefit?”

“It means an employee benefit that’s too small to be treated as wages,” I explained.

“But the hams and turkeys each cost about the same as the gift card,” he stammered.

“Unfortunately, that has nothing to do with it,” I replied. “A ham or turkey would be de minimis benefit; however, the $25 gift card would be wages.”

He sighed. “Well, if we can’t give $25, what’s the lowest amount we could give?”

“It doesn’t matter,” I answered. “Even if the gift card was a dollar, it would still be considered income.”

“You can’t buy a ham for a dollar,” he said.

“That’s not my point,” I said.

“Let me get this straight,” he said. “I can go and buy 150 hams, turkeys, tofu loafs, whatever … go through the trouble and expense of distributing them … and I don’t have to treat them as wages. But if I streamline the process, make it more economical and give everyone a gift card instead of the food, it’s not a de minimis benefit and I have to treat it as wages?”

“That’s exactly what I’m saying,” I answered. “The Internal Revenue Code is pretty clear that cash or cash-equivalents, like gift cards, cannot qualify as de minimis benefits.”

“That makes no sense,” he grumbled.

“It’s the IRS,” I shrugged.

“I have another question,” he continued. “Are we engaging in religious discrimination if we put up a Christmas tree in the lobby?”

I rubbed my head. My stomach grumbled again, but my ham…or turkey…or tofu sandwich was going to have to wait a while longer.