Barclays to Reimburse Gay Workers for Taxes on U.S. Benefits

Barclays Plc, Britain’s third- largest bank, is joining Google Inc. and a small number of companies in reimbursing U.S. employees for federal tax they pay on health benefits provided to same-sex domestic partners.

The aim is to offset the tax on benefits for same-sex partners that doesn’t apply to spouses in heterosexual marriages because same-sex partnerships aren’t recognized as marriages under U.S. law, the London-based bank said today in a statement. The change will take effect Jan. 1, according to the bank, which bought the U.S. business of bankrupt Wall Street firm Lehman Brothers Holdings Inc. in 2008.

Barclays may be leading the U.S. financial-services industry in offering such tax-equalization payments. Google, in Mountain View, California, Cisco Systems Inc., based in San Jose, California, and San Francisco-based Kimpton Hotels & Restaurants are the only other for-profit companies to publicly disclose such reimbursement benefits, according to the Washington-based Human Rights Campaign.

“We are introducing this payment to proactively offset the additional tax,” Mark Lane, a spokesman for Barclays Capital, said in an e-mailed statement. “We believe that by offering this, we will further our efforts to promote an inclusive environment.” Barclays will reimburse employees through a separate payment rather than an increase in base salary, Lane said.

Several financial companies, including Citigroup Inc., Morgan Stanley, and HSBC North America, have joined the Campaign’s Business Coalition for Benefits Tax Equity, an effort for equal benefits.

‘Civil Rights Issue’

Same-sex partners pay an average of $1,069 more in federal tax than people in heterosexual marriages with the same benefits, according to a 2007 study conducted by the Center for American Progress and the Williams Institute. Employers also pay added administrative costs of tracking the dependent status of covered same-sex partners and spouses and maintaining separate payroll functions, the study said.

Reimbursements or “gross-up” benefits offered by Google and Barclays would increase costs for the employers but could improve employee retention, said Todd A. Solomon, a partner with the employee-benefits group of law firm McDermott Will & Emery in Chicago.

“It’s simply to provide equal pay for equal work in this civil rights issue, there’s really no financial incentive,” Solomon said in a phone interview. “The bottom line is more than how much cash you spend today, it may help the bottom line to be seen as the employer of choice.”

Barclays, which said in September that U.S.-born President Robert Diamond, 59, will succeed Chief Executive Officer John Varley at the end of March, doesn’t disclose how many people it employs in the U.S. In its annual report, the bank said it employed 88,500 people outside the U.K. at the end of last year.

To contact the reporters on this story: Nishad Majmudar in New York at nmajmudar@bloomberg.net; Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.