It started out as a simple plan to help employees pay for their own health insurance: one Sunday every month, George MacLeod turns his Bucksport, Maine, restaurant over to employees and allows them to divvy up the profits to buy health insurance. Like many small-business owners, MacLeod had all but eliminated employer-paid coverage because of skyrocketing costs. But when an agent pitched a group health plan with attractive rates, MacLeod approached his employees with an unconventional proposal: the restaurant, normally closed on Sundays, would be theirs to run one Sunday a month. All proceeds would go through the register, of course. Seven percent for sales tax and 35% for food costs would be taken off the gross; and, as stated by IRS rules, earnings used to buy insurance would be tax-free.

When MacLeod started the "First Sunday" program, one year ago, half of his 16 employees signed on; since then they've made enough every month to cover the cost of health insurance (the average monthly tab: $120 a person). "I had this sense of trepidation that this was so simple, there had to be something wrong with it," recalls MacLeod. The State Bureau of Taxation and the Department of Labor thought so, too. Concerned that MacLeod was skirting wage and hour regulations, they paid him a visit, but they discovered that everything was on the level. MacLeod's program is covered under IRS rules regarding cafeteria benefits plans, and he complies with wage and hour rules by guaranteeing that all employees make at least minimum wage on "their" Sunday. Tips are pooled and divided equally, and are reported along with regular wages.

Although the program was originally limited to those employees who wanted to buy health insurance, MacLeod has since expanded it to include any full-time employee who wants to earn a little extra money. (In that case, the worker pays all taxes.) Currently, 6 to 8 employees are involved; 4 use the program to pay for health insurance.

The result? MacLeod thinks First Sunday has helped him attract and retain good employees in a labor market plagued by high turnover. And because participating employees take turns acting as First Sunday manager, MacLeod believes the program "helps them break out of unproductive work attitudes and think creatively. They have to learn how to plan, to organize, to delegate, and to lead." That also helps bridge the gap between management and employees. "They talk to me on more of a peer level now," notes MacLeod. "And when they see me make a decision, they understand why."