COVID-19 Federal Assistance e311


Premium & Hazard Pay

Funding Source

American Rescue Plan Act

Is additional pay, including hazard pay and bonuses, a permitted use of ARP funds?

A municipal government may use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) payments to provide premium pay to eligible workers performing essential functions during the COVID-19 public health emergency or to provide grants to third-party employers of eligible workers performing essential functions.[1]

The U.S. Department of the Treasury (“Treasury”) Final Rule states, “[a] recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work, or to provide grants to eligible employers that have eligible workers who perform essential work.”[2]

In addition, Treasury states in the Supplementary Information discussion of the Final Rule that, “[p]remium pay is designed to compensate workers that, by virtue of their employment, were forced to take on additional burdens and make great personal sacrifices as a result of the COVID-19 pandemic. Premium pay can be thought of as hazard pay by another name.”[3]

Based on these statements in the Final Rule, recipients can use CSLFRF assistance to provide premium pay for essential employees who have performed what is considered “essential work.” It is important to note that premium pay is targeted at workers who faced or face heightened risks due to the character of their work. The Final Rule defines essential work as work involving regular in-person interactions or regular physical handling of items that were also handled by others.[4] A worker performing telework from a residence, for example, would not be engaged in essential work and may not receive premium pay.[5]

Therefore, municipal governments may use CSLFRF funding to provide premium pay directly, or through grants to private employers, to a broad range of eligible workers performing essential work,[6] including:

  • Staff at nursing homes, hospitals, and home care settings;
  • Workers at farms, food production facilities, grocery stores, and restaurants;
  • Janitors and sanitation workers;
  • Truck drivers, transit staff, and warehouse workers;
  • Public health and safety staff;
  • Childcare workers, educators, and other school staff; and
  • Social service and human services staff.[7]

The term “premium pay” is identified as an additional amount up to $13 per hour paid to an eligible worker for work during the COVID-19 pandemic. The Final Rule imposes a cap of $25,000 for any single eligible worker.[8]

Treasury’s Final Rule emphasizes the need for recipients to prioritize premium pay for lower-income workers. Premium pay that would increase a worker’s total pay above 150% of the greater of the residing state or county’s average annual wage requires specific justification for how it responds to the needs of these workers.[9] A written justification is not required, however, if the eligible worker is not exempt from the FLSA overtime provisions.[10]

In addition, the Final Rule allows employers to use CSLFRF funding to offer retroactive premium pay, recognizing that many essential workers have not yet received additional compensation for work performed.[11]

Last Revised: March 15, 2022

[1] American Rescue Plan Act of 2021 § 9901, Pub. L. No. 117-2, amending 42 U.S.C. § 801 et seq., at Section 602(c)(1), available at:

[2] Treas. Reg. 31 CFR 35 at 423, available at:

[3] Id., at 219.

[4] Id., at 407-408.

[5] Id.

[6] Id., at 392.

[7] U.S. Department of the Treasury, FACT SHEET: The Coronavirus State and Local Fiscal Recovery Funds Will Deliver $350 Billion for State, Local, Territorial, and Tribal Governments to Respond to the COVID-19 Emergency and Bring Back Jobs, at 6, available at:

[8] Treas. Reg. 31 CFR 35 at 410, available at:

[9] Id., at 423.

[10] Id., at 230.

[11] Id., at 232-233.