In many industries, there are several components to salary, and one or more of those components may fluctuate from year to year. For example, an employee may receive a base salary but also commissions and/or a bonus. Commissions are generally calculated as a percentage of the value of sales made by that individual, or possibly a group of individuals. Bonuses may be based on the bottom line of the company in any particular year, as well as an individual’s efforts or profitability. The above may be affected by the economy or by the economic health of that particular business. Other sources of income which may cause fluctuation from year-to-year are wages from seasonal work, dividends on stock, and royalties from the sale of books or recordings.
Assuming that the payor of support has not voluntarily reduced his/her productivity in an effort to pay less in alimony or child support, a court will take into consideration these fluctuations from year-to-year, whether extreme or not.
While there are no explicit guidelines for alimony, a review of the Child Support Guidelines is helpful with this issue. Pursuant to our New Jersey Court Rules, which sets forth the Child Support Guidelines along with lengthy instructions on how to apply them, it is clear that if income is sporadic, or fluctuates from year-to-year, the amount of income to be included as gross income for support purposes is to be determined by averaging income over the previous 36 months. For overtime pay or income from a second job, the average is based on the prior 12 months.
The Appellate Court in a recent case has determined that a trial court may properly average an individual’s income over a three to five year period in order to establish an amount not only for child support, but for alimony.