Forms, Policies, & Guides

305 - Variable Pay

Subject: Variable Pay (formerly Incentive/Bonus Pay, 307 and Compensation for Additional Duties, 308)

Section: U305

Date: February, 2015


Purpose:

To establish variable pay program (i.e., bonus awards and incentive pay) guidelines for staff employees.

POLICY:

In addition to base pay, units have the flexibility to provide variable pay opportunities to reward exceptional performance (i.e., bonus award) or achievement of specific goals (i.e., as described in an incentive plan). Recognition of ongoing performance should be reflected in base pay level, rather than with a bonus award or incentive payment.

DEFINITIONS:

Bonus Award: payment given to an employee to recognize performance or acceptance of an employment offer. Bonus awards are discretionary, given after the fact, reflected as a single or one-time payment (i.e., lump sum), and are in addition to an employee's base pay.

Incentive Payment: designed to motivate employees to achieve desired short or long-term goals. An incentive payment is nondiscretionary, formula driven, tied to expected results identified at the beginning of a performance cycle, and is in addition to an employee's base pay.

Guidelines:

A. Overview

1. HR Partners and unit leadership should consult with HR-Compensation in the development of a program for incentive payments and regarding bonus awards above $2,000 threshold. All incentive payments or bonus awards must be approved by the appropriate Dean or Director prior to submission to HR-Compensation.

2. An incentive payment or bonus award for an employee is payable in the pay period following the pay period in which the qualifying activity occurred.

B. Bonus Award

1. A bonus award may be used to reward an employee's special efforts or a high level of performance on projects or special assignments. A bonus award is delivered after the fact, based upon judgment of performance. It is discretionary in nature and should not be used to incentivize an employee in advance of performing the work.

2. Bonus awards may be appropriate for exempt employees who perform additional work outside the scope of his/her responsibility for a short timeframe.

a. Performance of work requiring an exceptional amount of extra time (i.e., equivalent of more than one day per week) or involvement in a special project may warrant a bonus award.

b. Bonus awards are for performance of work that occurs in a timeframe of less than 3 months. For ongoing changes in work demands, the HR Partner submits an updated job description for job evaluation.

3. Bonus awards may be appropriate when an employee performs work for another unit.

a. Permission is required by employee's primary unit before working in another unit.

b. Employee may perform additional duties for up to 3 days per month.

c. Performance of work should occur in a timeframe less than 3 months. For an ongoing occurrence, the unit should consider longer-term options such as training current employees or creating a new position.

4. Bonus awards may be appropriate for an employee who has temporarily assumed major responsibility for, and performance of, another position (i.e., acting/interim during vacancy), subject to the following guidelines:

a. The employee has assumed additional responsibility in addition to primary responsibilities.

b. Appropriate documentation relating to the temporary vacancy (i.e. leave of absence) must be submitted to unit HR Partner.

c. Managers cannot receive bonus awards for performing the work of a subordinate employee.

d. In assigning additional responsibility any offering a bonus award, units should be mindful of impact to their broader team, and plan around:

i. How the employee's primary job responsibilities will be handled.

ii. How the responsibilities of the vacant job are distributed.

e. An employee may be paid up to fifty (50%) of the vacant position pay level; percentage should align with the percentage of time given to the additional responsibilities.

f. If the unit is actively considering the interim employee for promotion to the vacancy, the unit may pay the interim employee at the higher level for up to a 3 month timeframe. After 3 months, alternatives below should be considered in developing a longer-term solution:

i. Offer the position to the interim employee if she/he is the most qualified candidate after a competitive search,

ii. Request job evaluation of interim employee's updated job description, which integrates additional responsibilities,

iii. Rotate interim employee out of performing additional responsibilities, or iv. Restructure additional responsibilities in another way.

5. Bonus awards of up to $2,000 may be given to an employee for exceptional performance, in conjunction with written justification provided to unit HR Partner. Bonus awards greater than $2,000 and the corresponding written justification will be reviewed by the unit HR Partner and HR-Compensation.

6. Bonus awards may be appropriate in special hiring situations that are highly competitive or market driven. These sign-on bonus awards must be expressly stated in offer letters.

C. Incentive Payment

1. Incentive payment is delivered through a formal, documented, and approved program based on a predetermined performance and reward schedule. Employee performance is measured against the goals and objectives of the plan. The incentive may be paid in alignment with a specific timeframe (i.e., pay period, quarter, year, or multi-year) or when an event occurs (i.e., achieving a milestone, completing a project).

2. Unit leadership may develop and recommend a formal incentive plan for one or more employees in the unit. The plan proposal must include the following:

a. Goals: what the plan intends to accomplish;

b. Eligibility: who may participate in the plan and impact of termination;

c. Funding: how the plan will be funded;

d. Measurement Definition or Criteria: how individual or group rewards will be determined;

e. Timing: when payments will be made;

f. Length: how long the program will last;

g. Impact of Plan: description of potential positive and negative impacts of the plan; and

h. Administration: how the plan will be governed and communicated.

3. All incentive plan proposals must be reviewed by unit HR Partner and HR-Compensation prior to communication to employees and implementation.

4. All incentive payments must be included in the regular rate of pay for overtime purposes.

Employees represented by a bargaining unit may be governed by the appropriate bargaining unit agreement.