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Procedures for Administering Special Merit Pay

Table of Contents

Purpose

The Special Merit Pay policy 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.

Overview

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.

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.

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.

Special merit payments are not to be included in an offer for employment or as part of a retention package. They are not to be announced to employees to induce them to work more steadily, more rapidly, or more efficiently.

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 payments are nonrecurring, are not added to base salaries, and are not included when calculating benefits. The payments are taxable wages subject to withholdings.

Employee Eligibility

Special Merit Pay is to be awarded for activities that occurred during the previous fiscal year.

Employee categories eligible to receive special merit pay are:

  • Regular clerical and service staff
  • Exempt and nonexempt regular administrative and professional staff and continuing lecturers
  • Tenured and tenure-track faculty, clinical/professional faculty, and research faculty.

Only faculty and staff members employed by Purdue in one of these employee categories since July 1 of the previous fiscal year (period covered by SMP payments) are eligible. See the Special Merit Pay policy for a list of categories that are ineligible for special merit pay.

Determining Award Funding Amounts

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

As part of the Special Merit Pay process, the Office of Budget and Fiscal Planning 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 policy, “units” are defined as areas reporting to the president, provost, executive vice president and treasurer, chancellors, deans, vice presidents, and vice provosts. These include:

  • Business Services
  • Calumet Campus
  • College of Agriculture
  • College of Consumer and Family Science
  • College of Education
  • College of Engineering
  • College of Liberal Arts
  • Discovery Park
  • Executive Vice President and Treasurer
  • Fort Wayne Campus
  • Graduate School
  • Housing and Food Services
  • Information Technology
  • Intercollegiate Athletics
  • International Programs
  • Libraries
  • North Central Campus
  • Office of Continuing Education and Conferences
  • Office of Engagement
  • Office of Governmental Relations
  • Physical Facilities
  • President
  • Provost
  • School of Management
  • College of Pharmacy, Nursing and Health Science
  • College of Science
  • College of Technology
  • School of Veterinary Medicine
  • Statewide Technology
  • Student Services
  • University Advancement
  • Vice President for Ethics and Compliance
  • Vice President for Research

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 in the Special Merit Pay policy. 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 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.

Award Calculations for Exempt Staff

For exempt employees, the amount of the award may not exceed 5 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
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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 Nonexempt Staff

Regulations issued by the Department of Labor permit employers to make bonus payments (including special merit payments) to nonexempt employees based on a percentage of the nonexempt employee's total yearly earnings as a substitute for the very complex calculations that would otherwise be required. Special merit payments for nonexempt 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 nonexempt employee with a concurrent appointment will be eligible for a special merit payment in each unit. The nonexempt employee's eligibility within each unit will be based on his or her annual pay rate and CUL within the unit. For a nonexempt 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 Processes

Awards of special merit pay will be made in a lump sum once annually to each recipient.
Using the process stipulated by their executive officer, each dean, director, or vice president will recommend faculty and staff for special merit pay. Executive officers will then consider and approve the recommendations made by the deans, directors, or vice presidents reporting to them.

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 nonexempt 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.

Executive officers make final approval decisions for issuance of special merit payments to nominees.

Business Processes

For FY 2008, Special Merit Pay will be issued in January. Effective FY 2009, Special Merit Pay will be awarded each year in November. Each unit wishing to award special merit pay will establish procedures to ensure that all required steps are completed on time.

Shortly after the beginning of each new fiscal year, Business Offices will receive:

  • A timeline with specific due dates
  • Allocation amounts for each college/budget unit
  • Detailed instructions for use in processing Special Merit Pay awards
  • Copies of required and optional forms

PLEASE NOTE:

  • Special Merit Pay cannot be funded with Sponsored Program Funds.
  • Special Merit Pay is not subject to effort reporting.

HR Service Center Processing

The HR Service Center will:

  • Validate the annual rate of pay for each employee listed on the worksheet
  • Verify that awards do not exceed 5 percent of each exempt recipient's approved budgeted annual salary (excluding administrative supplements or any other form of pay outside of base pay)
  • Verify that awards do not exceed 5 percent of each nonexempt recipient's total yearly earnings for the previous fiscal year
  • Verify that units have not exceeded their allotments

For More Information

For help with the processes involved in special merit pay, please contact: the Business Manager for your area, Compensation (494-7410), HR Service Center (494-6829), Payroll (494-1695), Housing and Food Services Human Resources (494-9418), Physical Facilities Human Resources (494-1421), Budget & Fiscal Planning (494-7141), or your Regional HR Office.

The Special Merit Pay Policy may be found online at http://www.purdue.edu/oop/policies/pages/human_resources/iv_5_4.html.