TN 23 (06-10)

A. Definition of military differential pay

Military differential (or supplemental) pay is any payment made by a civilian employer to an employee who has been called up for active duty with the National Guard or U.S. Air Force, Army, Coast Guard, Marine or Naval Reserves, which is intended to make up some or all of the difference between the employee’s higher civilian salary or wages and his/her active duty military pay.

B. Policy for military differential pay

Several State governments and some businesses voluntarily provide their employees who are on active reserve or National Guard duty (referred to as reservists) with payments to supplement their military pay so that they do not suffer a loss of income while serving. Employers may consider such payments to be a continuation of the employees’ regular salary or wages. The reservists should also continue to receive benefits as if they were still working, e.g. accrual of vacation time and coverage under the employer’s health insurance plan.

However, for purposes of Social Security coverage, section 209(a) of the Act defines wages as “remuneration…for employment” and section 210(a) defines employment (in part) as “any service…performed…by an employee for his or her employer.” See also 20 CFR sections 404.1003 through 404.1010 regarding the definition of “employment”. Since reservists on active military duty are not performing services for their civilian employers, payments made to them by those employers are not considered remuneration for employment. Therefore, military differential or supplemental pay is not wages for Social Security purposes. (NOTE: On the other hand, reservists on active duty are performing services as employees of the military and, effective January 1, 1957, their military base pay is wages.)