Operating Procedures for Special Merit Pay

Special Merit pay gives units flexibility in rewarding eligible faculty and staff for extra merit, special projects, and/or achievement of strategic objectives by allowing special lump sum awards outside of base pay.

DEFINITIONS

Special Merit Pay non-recurring lump sum payment awarded to faculty or staff member for outstanding performance

Major Unit – an area reporting to the president, provost, chief financial officer/treasurer, chancellors, deans, vice provosts, and vice presidents

Executive Officer – a University officer who reports directly to the president, including those individuals who hold a title of or equivalent to provost, chief financial officer, executive vice president, senior vice president, vice president, director of intercollegiate athletics, and chancellor

Control Totals – the number of faculty and staff to whom each major unit may award special merit pay and the maximum amount of that pay as set forth in the formulas provided in the procedures

EXCLUSIONS

  • Student Employees
  • Graduate Staff
  • Temporary Employees
  • Visiting Faculty
  • Limited Term Lecturers
  • Postdoctoral Appointments
  • Regular faculty and staff employed less than one year
  • Employees who have a specific employment contract with the University that links additional compensation to their performance

PROCEDURES

The Procedures for Administering Special Merit Pay will be reviewed annually. Special merit pay recommendations are at the sole discretion of the employing unit, and are not the result of any contract, agreement, or promise to employees that such pay will be made.

Appropriate Use

Examples of the appropriate use of special merit pay include:

  • Rewarding the achievement of an objective in support of a strategic goal
  • Rewarding extraordinary merit displayed by an employee
  • Rewarding the successful completion of a special project related to the organization's operational or strategic goals

Examples of the inappropriate use of special merit pay include:

  • Rewarding attendance
  • Payments for quantity, quality, and/or accuracy of work
  • Payments contingent upon the faculty or staff member's continuing employment

 

Special merit pay is not to be included in an offer for employment or as part of a retention package. It is not to be announced to employees to induce them to work more steadily, more rapidly, or more efficiently. Special merit pay may not be awarded to University employees for an internal transfer.

Special merit pay is nonrecurring, is not added to base salary, and is not included when calculating benefits. It cannot be charged to federal funds. An award of special merit pay is made in a lump sum once annually to each recipient. The payment is a taxable wage subject to withholdings.

Criteria

Each unit (or each subdivision of a unit) deciding to award special merit pay will establish its own criteria for the awards. Criteria must be related to extraordinary merit or activities facilitating the achievement of strategic goals. Each unit making special merit payments must maintain documentation both of the criteria and the process used for determining awards and the names of all employees receiving awards. Each unit is urged to consult with its Human Resources office in determining appropriate award criteria.

Schedule

To be determined by fiscal year. The awards will be for activities that took place during the previous fiscal year.

Employee Eligibility

Special merit pay may be provided to tenured and tenure-track faculty; clinical/professional faculty; research faculty; benefits-eligible clerical, service, operations/technical, administrative, and professional staff; and continuing lecturers who have been employed at the University for at least one year.

Determining Funding Amounts

Purdue University does not provide central funding of special merit pay.

As part of the special merit pay process, the Office of Financial Planning and Analysis will provide regional campuses, Statewide Technology, and West Lafayette units with their control totals after the beginning of the fiscal year. This information will include a worksheet/log that units can use to monitor special merit pay expenditures. The worksheet will also serve as a group personnel action form.

For the purposes of the special merit pay, “units” are defined as areas reporting to the president, provost, treasurer and chief financial officer, chancellors, vice presidents, deans (West Lafayette campus), and vice provosts. 

Control amounts will establish the number of faculty and staff to whom each unit may award special merit pay and the maximum amount of pay as set forth in the formulas provided for special merit pay. Employee categories are as follows:

  • Tenured and tenure-track faculty, clinical/professional faculty, and research faculty
  • Exempt and non-exempt benefits-eligible administrative and professional staff and continuing lecturers
  • Benefits-eligible clerical and service staff

 

Each unit may use up to one half of one percent of its budgeted salary base (excluding administrative supplements) for each employee category to make special merit pay awards to employees in the category. A unit may award special merit pay to a maximum of 15 percent of its total number of budgeted faculty and staff in each eligible category.

Control totals for numbers of employees eligible for special merit pay will be based on the unit's current-year budgeted positions in each employee category. Control totals for the maximum dollar limit of payments will be based on the unit's current year budgeted salary base for each employee category, excluding vacant positions budgeted in the reserves for unfilled positions. Control totals for special merit pay cannot be spread across employee categories. For example, amounts available to reward clerical and service staff cannot be allocated for faculty.

Award Calculation for Exempt Staff

For exempt employees, the amount of the award may not exceed five percent of the employee's current base salary, or $7,500, whichever is less. Overloads, administrative supplements, and other pay outside of base pay will not be included in the calculations for exempt staff.

If an exempt employee has a concurrent appointment, he or she will be eligible for a special merit pay in each unit. The employee's eligibility will be based on his or her annual rate and CUL within the unit, and special merit payments will be applied against each unit's eligibility. Each unit decides independently whether to award special merit pay to the concurrently employed appointee.

Example:

John Smith Units = Engineering and Discovery Park 
Annual Rate = Engineering $45,000, Discovery Park $5,000 
CUL = Engineering 90, Discovery Park 10 
Eligibility = Engineering $2,250, Discovery Park $250 
----------------------------------------------------------------- 
SPECIAL MERIT PAY = $1,500, distributed as Engineering = $1,350 
(based on 90 CUL) and Discovery Park = $150 (based on 10 CUL)

Award Calculations for Non-exempt Staff

Regulations issued by the Department of Labor permit employers to make bonus payments (including special merit payments) to non-exempt employees based on a percentage of the non-exempt employee's total yearly earnings as a substitute for the very complex calculations that would otherwise be required. Special merit payments for non-exempt staff cannot be calculated using the base rate of pay; the awards must be based on the employee's total earnings for the award period covered by the bonus, which would be the previous fiscal year.

A non-exempt employee with a concurrent appointment will be eligible for a special merit payment in each unit. The non-exempt employee's eligibility within each unit will be based on his or her annual pay rate and CUL within the unit. For a non-exempt employee, the special merit payment must be calculated based on the employee's total earnings in the awarding unit during the previous fiscal year. The special merit payment will be applied against the awarding unit's eligibility. Each unit decides independently whether to award special merit pay to the concurrently employed appointee.

Approval Process

Using the process stipulated by their executive officer, each dean, director, vice provost and vice chancellor will recommend faculty and staff for special merit pay. Executive officers will then consider the recommendations made by those reporting to them and make final approval decisions for issuance of special merit payments to nominees.

Human Resources provides a recommendation form that departments may use to:

  • Identify each award recipient
  • Note the base salary of each exempt recipient
  • Record the total yearly earnings for the previous fiscal year for each non-exempt recipient
  • Provide the rationale for making the award to each recipient
  • Record appropriate approvals

Use of the recommendation form is optional; however, departments opting not to use the form will need to provide the information outlined above through some other means.

University’s Sole Discretion

Special merit pay is not an entitlement. Awards of special merit pay are made based on extraordinary performance and the availability of funds. Awarding of special merit pay and the amount of any award are determined at the sole discretion of the University. Such determinations will not be eligible for dispute resolution under any of the University’s formal dispute resolution processes for faculty or staff.

SPECIAL SITUATIONS

Any deviation from this special merit pay operating procedure requires approval by the President or the President’s designee.

HISTORY AND UPDATES

June 1, 2016: Operating procedures were created and the policy was rescinded (Policy II.C.4).

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