Simply defined, an Hour Bank is an over-charge of monthly benefits premiums. By creating a surplus reserve of premium payments, the employee can use their Hour Bank to cover the cost of benefits when they are not working.
By calculating fringe contributions in this manner, as opposed to a straight monthly premium, employees can easily see the status of their benefits contribution funding based upon the number of hours per month (i.e. 130, 140 or 150) they have worked.
By limiting payments for medical benefits to periods when an employee is working, Hour Banks can reduce employee benefit costs.
With a 130 Hour Bank, an employee is required to work 130 hours per month in order to fully fund their benefits contributions. In the event that the employee works 160 hours in a month, the 30 additional hours would be credited to their Hour Bank. If that employee continued to work 160 hours per month, after 4.5 months, they would have accumulated enough banked fringe money to cover the cost of 1 month’s benefit premiums.
If that employee were to be laid-off after 4.5 months, they would be able to pay their full benefits contribution from their Hour Bank for an additional month without any out-of-pocket cost.
