Guaranteed Annual Wage Plan Law and Legal Definition

Guaranteed annual wage plan refers to a wage-payment method. In this method, the employer agrees either to pay employees a fixed minimum amount each year or to provide a minimum number of hours of employment each year. There are various types of guaranteed annual wage plans. For example, an employer agrees to pay wages to an employee on weekly basis even though work may not be available at certain times of the year. The main objective of this plan is to provide a stable labor force. However, guaranteed annual wage plan is not a supplemental to unemployment compensation plan.[ Newberry v. Commissioner, 76 T.C. 441, 445 (T.C. 1981)]