Specified employee: Overview, definition, and example
What is a specified employee?
A specified employee refers to an individual within a company who is specifically designated for certain roles or responsibilities, often identified in legal or business documents. This term can also refer to employees whose positions or actions are subject to particular terms, conditions, or legal provisions—such as tax laws, compensation structures, or benefit eligibility. In some contexts, a specified employee might be someone in a high-ranking position, such as a director or officer, whose compensation or other employment terms are outlined separately from those of regular employees.
For example, a "specified employee" might refer to the CEO of a company, who has a specific salary, bonus structure, or retirement plan outlined in the company’s bylaws or employment contract.
Why is a specified employee important?
A specified employee is important because they often have distinct responsibilities, compensation arrangements, or legal obligations that differ from other employees. These employees may have special rights or limitations regarding things like retirement benefits, stock options, or severance pay. Understanding who qualifies as a specified employee can help businesses comply with tax laws, employee benefit regulations, and other employment laws that treat different roles or levels of employees in specific ways.
For SMBs, clearly identifying specified employees helps ensure compliance with regulations and can clarify roles and expectations for senior or key personnel within the business.
Understanding specified employee through an example
Imagine your small business is offering a stock option plan, but only certain high-level employees (such as the CEO or CFO) are eligible. These specified employees are granted the option to purchase company stock at a certain price as part of their compensation package. The terms and conditions of their stock options would be specifically outlined in their employment contracts, separate from the general employees' benefits.
In another example, your business may be subject to tax laws that impose special reporting requirements or limitations on specified employees—such as the CEO or top executives—who receive certain types of compensation, like large bonuses or deferred income.
An example of specified employee in action
Here’s how a specified employee might be referenced in a contract or agreement:
“The company will provide specified employees, including the CEO and CFO, with additional retirement benefits beyond those offered to other employees. These benefits will be outlined in their respective employment agreements.”
Conclusion
A specified employee is someone within a company who is designated for particular roles or responsibilities and may have different terms or benefits compared to other employees. For SMBs, clearly identifying and understanding the role of specified employees ensures compliance with laws, helps manage compensation and benefits, and establishes clear expectations for key personnel. Properly defining these employees also aids in meeting legal requirements related to taxes, benefits, and employment agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.