Forms, Policies, & Guides

307 - Incentive/Bonus Pay

Subject: Incentive/Bonus Pay

Section: U307

Date: September 28, 2005


Purpose:

To establish guidelines for developing, recommending, and implementing incentive/bonus pay programs for staff employees.

Policy:

The University provides every employee with base compensation. However, there are circumstances when additional payment is appropriate to provide a reward for exceptional performance or to recognize successful participation in an incentive program. Incentive/bonus pay consists of compensation that is contingent on discretion, performance, or results achieved.

Definitions:

Incentive: A pay plan that is designed to reward the accomplishment of specific results. An incentive payment is tied to expected results which are identified at the beginning of a performance cycle. An incentive plan is forward-looking in contrast to a bonus; it is a nondiscretionary lump-sum payment in addition to an employee’s base pay.

Bonus: An after-the-fact discretionary lump-sum payment in addition to an employee’s base pay.

Guidelines:

A.  General Incentive/Bonus Pay Guidelines
  1. A supervisor or unit human resources representative should consult with Human Resources (HR) before establishing or committing to an incentive pay plan or bonus and before communicating any such payment to an employee. All incentive or bonus payments must be approved by the appropriate Dean or Director prior to submission to HR.
  2. An incentive plan or bonus payment for an employee is payable in the pay period following the pay period in which the qualifying activity occurred. An incentive plan or bonus payment under this policy is made through the Monthly Extra Service Payment Request (UPP 172) Form for an exempt staff employee and the Biweekly Additional Payment (UPP 173) Form for a non-exempt staff employee.
  3. Incentive/bonus payments may be appropriate in special hiring situations that are highly competitive or market driven. Payment of these incentives may be addressed in offer letters and should be reviewed by HR – Employment or HR – Compensation prior to issuance. Consideration should be given to schedule the incentive payout after the probationary period is successfully completed.
B.  Bonuses
  1. A bonus may be used to reward an employee’s special efforts and high level of performance on projects or special assignments. A bonus is delivered after the fact, based on a supervisor’s judgment of performance and the warranted reward. It is discretionary in nature and should not be used to incentivize an employee in advance of performing the work.
  2. A supervisor may recommend payment of a lump sum amount of up to $2,000 to an employee for exceptional performance, provided appropriate written justification is received. A payment request over this amount will be reviewed by HR. A payment for ongoing performance should be reflected in the employee's base pay rather than a bonus amount. A base pay increase for performance should be made during the Annual Compensation Planning/Performance Planning Feedback Process as specified in Policy U306 Base Pay Administration.
  3. If a non-exempt staff employee is informed of a bonus before performing the work, it will be considered an incentive payment. An incentive payment must be included in average hourly earnings when calculating overtime pay for the eligible period.
C.  Incentive Pay
  1. An incentive is delivered through a formal, documented, and approved plan 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 an accounting period (i.e., pay period, month, quarter, year, or multi-year) or upon an event (reaching an objective, completing a project, etc.).
  2. A unit head or supervisor may develop and recommend a formal incentive plan for one or more employee(s) in the unit. HR - Compensation is available to consult on the design of the incentive plan. The plan proposal must include the following:
    • what the plan intends to accomplish;
    • who may participate in the plan;
    • how funds will be generated to pay for the plan;
    • how individual or group reward amounts will be determined;
    • when payments will be made;
    • how long the program will last;
    • all potential positive and negative impacts of the plan; and
    • how the plan will be communicated, documented, and administered.
  3. All incentive plan proposals must be reviewed by HR prior to communication to employees and implementation.
  4. Any incentive plan payment to a non-exempt employee must be included in average hourly earnings when calculating overtime pay.


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