Premium Pay for Essential Workers

Megan Leopold
Fiscal Analyst

Murl Riedel
Fiscal Analyst

American Rescue Plan Act

The federal American Rescue Plan Act (ARPA) of 2021 provides $2.6 billion, from the Coronavirus State and Local Fiscal Recovery Funds (Fiscal Recovery Funds), to state and local governments for discretionary purposes. Among other stated uses, these discretionary funds may be used to provide premium pay to eligible workers performing essential work during the COVID-19 public health emergency.

Premium Pay to Essential Workers

ARPA allows states to use their Fiscal Recovery Funds to support essential workers by providing premium pay directly to workers or through grants to third-party employers with eligible employees.

The intent of the premium pay is to help maintain continuity of operations that are critical to the health and well-being of communities as well as provide compensation to workers who have been at increased risk of contracting COVID-19 due to the nature of their jobs.

Premium pay is to be added to workers’ normal earnings and may not substitute for a worker’s normal earnings. Premium pay may be applied retrospectively for work performed since the start of the COVID-19 public health emergency.


In order to ensure that premium pay is directed toward the intended population, ARPA provides guidance that eligible workers should be both at heightened risk of exposure due to the nature of their work and be critical to the continuity of essential operations.

Heightened Risk. Premium pay is to be reserved for individuals who engage in work that involves “regular in-person interactions or regular physical handling of items that were also handled by others.” By this definition, a worker who engaged in telework from a residence would not be eligible for premium pay.

Essential. Eligible workers are those who are necessary to maintain continuity of operations of critical infrastructure sectors. While governments receiving Fiscal Recovery Funds have the discretion to identify critical sectors in their communities, the following sectors are identified as essential:

  • Health care;
  • Public health and safety;
  • Child care;
  • Education;
  • Sanitation;
  • Food service; and
  • Transportation.


ARPA recognizes that many workers in the sectors listed above will make lower than average wages in their sector, creating a misalignment between health risk and compensation. To ensure these funds are directed toward these workers, the following guidelines have been created:

  • Premium pay should be limited to $13 per hour in addition to the wages the worker already receives, and not exceed an aggregate amount of $25,000 per worker;
  • Lower income workers should be prioritized;
  • Premium pay that would increase a worker’s total pay to an amount that is above 150.0 percent of the state’s average annual wage for all occupations requires written justification; and
  • Grants provided to third-party employers for the purpose of providing premium pay must be publicly disclosed and follow specific reporting requirements.

Premium Pay in Kansas

On September 3, 2021, the Governor’s Strengthening People and Revitalizing Kansas (SPARK) Task Force recommended, and the State Finance Council approved, the allocation of $50.0 million from Fiscal Recovery Funds for hospitals to either provide premium pay or create custom retention programs for clinical staff.

Qualified staff include nurses and other employees who provide frontline care. Any general or critical access hospital with an emergency department as defined under KSA 65-425 is considered a qualified facility.

Hospitals must apply for the funding, which will be allocated to each hospital based on the number of licensed non-ICU beds and ICU beds. This funding must be spent by February 28, 2022, and may be applied retroactively to September 1, 2021.
As of October 2021, 118 Kansas hospitals have been awarded funds, with awards ranging from $39,797 to $7.5 million. The largest allocations included:

  • $7.5 million to Ascension Via Christi Hospital in Wichita;
  • $5.5 million to the University of Kansas Health System in Kansas City; and
  • $5.0 million to Wesley Medical Center in Wichita.