Purpose.  The incentive pay plan seeks to reward faculty members with incentive pay up to 50% of the amount of salary recovered from external funding sources.

Incentive Pay Procedure.  Faculty seeking incentive pay must obtain external funding for their base salary, negotiate an agreement with their chair and dean, verify work performed by signing the semester's effort certification form, and initiate payment on the mid-month payroll by completing an incentive pay request form.

External Funding Proposal.  For faculty to be eligible for incentive compensation, the external sponsor must provide funding for their base salary, all associated benefits, and the maximum Facilities and Administration (F&A also known as indirect costs) rate allowed by the sponsor's formal policy.

In order to comply with federal cost principles in Office of Management and Budget Circular A-21, it is important that the cost to the external sponsor remain unchanged as a result of the incentive pay plan. In general, federal grants do not allow extra compensation to be charged directly to a federal grant.  However, a percentage of the faculty member's base salary, commensurate with his/her level of effort, may be charged to the grant.  Federal cost principles allow charging a percentage of base salary commensurate with the faculty's level of effort on the federal grant. University funds 'salary recovery' by direct charging base salary to external funding sources can be used for incentive pay provided that not TBR policy or Tennessee law is violated.

Situations may arise where the external funding entity may pay extra compensation and/or incentive compensation. However, this is appropriate only if more work is performed and is approved in writing by the sponsoring agency. Faculty receiving release time to work on the externally funded project should not receive extra compensation.

Incentive Compensation Agreement & Payment Request. The purpose of this agreement is to create an understanding between faculty, chairs, and deans regarding the disposition of base salary budget recovered from external funding sources. These agreements should not be approved by financial designees.

• Before any incentive can be paid, the needs of the university must first be met. Grant activity employ may entail some buy-out of the faculty member's teaching responsibility, requiring the engagement of a temporary instructor. The cost of temporary instruction should be specified in block 6a of the Incentive Compensation Agreement & Payment Request.

• At the discretion of the chair and dean, other costs associated with the faculty member's external funding activities may also require additional expenditure of departmental funds.  The amount of other costs should be included in block 6b and are at the discretion of the chair and dean.

• Some faculty have research appointments with contracts that require that they bring in external funding to pay a percentage of their base salary. Faculty in this case must first recover that portion of their base salary before being eligible for incentive pay. In this situation, the amount or percentage which must be recovered should be specified in block 6 of the agreement. After repaying the university the amount or percentage specified in block 6 or any other cost assessments as specified in item 2 above, research faculty may receive incentive pay up to the maximum of 50% of total salary recovery.

• The University is not required to pay the maximum incentive of 50%. Rather, the chairs and deans may negotiate incentive percentages less than 50% in order to meet department and college needs. Use block 6c to document the agreed upon incentive percentage.

• The comment section should be used to document the expected course load or other assigned duties upon which the agreement was based. Faculty, chairs, and deans should re-negotiate the agreement when faculty members receive multiple awards.

• The agreement should be re-negotiated every one to three years to give all parties a chance to adapt to unforeseen circumstances.

Example 1. Agreement for a single course release: blocks 6a, b, and c is $2,000; block 6 is 50%.

• Faculty recovers $4,000. The first $2,000 goes toward temporary instruction; the last $2,000 pays the maximum (50% of recovery) incentive.

• Faculty recovers $6,000. The first $2,000 goes toward temporary instruction; the next $3,000 pays the maximum (50% of recovery) incentive; the remaining $1,000 goes to the department.

• Faculty recovers $3,000. The first $2,000 goes toward temporary instruction; the remaining $1,000 is not enough to pay the maximum (50% of recovery) incentive, so actual incentive pay is limited to the $1,000 remaining.

Example 2.  Agreement for single course release: Block 6a, b, and c is $2,000; Block 6 is 25%.

• Faculty recovers $4,000. The first $2,000 goes to temporary instruction; the next $1,000 pays the maximum (25% of recovery) incentive; the remaining $1,000 goes to the department.

• Faculty recovers $6,000. The first $2,000 goes toward temporary instruction; the next $1,500 pays the maximum (25% of recovery) incentive; the remaining $2,500 goes to the department.

• Faculty recovers $3,000. The first $2,000 goes toward temporary instruction; the remaining $1,000 is enough to pay the maximum (25% of recovery) incentive of $750; the remaining $250 goes to the department.

For faculty to qualify for incentive compensation, the external sponsor must provide the maximum F&A allowed by the sponsor's formal policy

Salary recovery funds left after faculty replacement costs and incentive compensation remain with the department for its discretionary use. This amount cannot be calculated until the precise amount of salary recovery for the semester is known.

To request payment following each semester, faculty must submit an Incentive Compensation Agreement & Payment Request form, and a copy of their Effort Certification form to document their effort on the sponsored project

Payment.  The deadline is the 5th day of the month, payable at the end of the month.

Retirement Benefits. Retirement benefits only accrue on the first 25% of additional compensation. Incentive compensation (or a combination of incentive and extra compensation) in excess of 25% will not be reported as retirement wages.

SPECIAL OR INTERIM ASSIGNMENTS

Salaries for Department Chairpersons

To establish consistency in setting salaries for chairpersons, the following practice has been established:

Chairpersons or interim chairpersons are eligible for salary supplements of seven percent (7%) in compensation for the associated administrative responsibilities of the position. If these responsibilities are relinquished, the salary supplements will be removed by dividing the base salary by 1.07.   The practice of reducing pay for relinquishing administrative duties applies uniformly to candidates selected from outside the University and to candidates appointed from within the department.  The stipulation for pay reduction will be included in the initial contract or as an amendment to the current contract respectively.

The seven percent (7%) administrative supplement will also be removed for academic chairs that are on Professional Development Assignment.

Other Special or Interim Assignments

For other assignments, e.g., Interim Dean, the procedure in Attachment B to 2D:05:12C, paragraph VI. Temporary or Interim Assignment to Higher Positions, may serve as a guideline for setting interim salaries.

Salary Supplements

Contact the Financial Planning Office for guidance in setting up salary supplements such as professorships.

PAYMENT SCHEDULE

Salaries, even if related to an academic year appointment, will be paid in twelve (12) separate checks (normally September through August).  An exception may be made at termination.  Also, those who fail to complete a full academic year or semester of work will be paid according to the guidelines in Section VI of this procedure, Partial Month's Pay for Monthly Paid Employees.