Types of Compensation

The UT Compensation Advisory Board (CAB) met recently to begin standardizing the way we talk about compensation across the university.  We agreed on common definitions for additional pay (often referred to as merit pay), incentive pay, bonus pay and retention pay.

A.      Merit Pay

Definition:  Merit Pay increases total compensation based on documented performance and contributions to achieve established performance goals and expectations within a defined period with a pre-approved method to assess an employee’s performance. Merit Pay may be in the form of increase to base pay or non-recurring lump sum payment.

B.      Incentive Pay

Definition:  An after-the-fact, pre-determined lump-sum payment to an individual or to a defined group to reward the accomplishment of specific results determined and documented at the onset of a defined period.

C.      Bonus Pay

Definition:  An after-the-fact, discretionary lump-sum payment to recognize exceptional service at a point in time.

D. Retention Payments

Retention Payment:  An infrequent situation in which an increase in total compensation is granted to a high-performing employee in a mission-critical position to retain his/her services. Such retention payments may or may not be associated with an offer of employment from another organization. Normally such payments would specify continued employment with the organization for a specific span of time.

CAB's recommendation will go to the president's staff for final approval and then will be adopted by all campuses and institutes. This is a great step in beginning to form an overall compensation strategy for the university.