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Performance Incentive Plan

shargoldshargold 13 Posts
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We are setting up a new monthly performance incentive program for all hourly employees, based upon productivity and other benchmarks we have established.

We are stating that employees are eligible only if they were employed during the entire month in which the bonus is based AND if they are still currently employed on the date the incentive is paid out.

We plan to pay out by the 3rd pay period of the following month, but I am concerned about employees who may resign or are terminated before we actually pay out the bonus. Can we deny them payment? Is this legal?

Thanks for your guidance!
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  • 6 Comments sorted by Votes Date Added
  • NaeNae55NaeNae55 3,243 Posts
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    Our commission plan says you must be still employed to receive your commissions (paid 2nd check of month following activity) and is completely legal. (I have seen similar plans held up in court.) Do 2 things to make sure you have covered your bases.

    1) Spell out everything clearly in your incentive plan.

    2) Check your state laws to make sure there is nothing specific there to prohibit your plan. What state are you in?


    Good luck!

    Nae
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  • shargoldshargold 13 Posts
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    We are in Texas, which is very pro-employee. So, we should be OK. We are definitely going to spell this out in the written document.

    Thanks for your quick response, Nae! I feel much better about this.....
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  • NaeNae55NaeNae55 3,243 Posts
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    I am in Kansas and am unfamiliar with Texas laws. You might check your with your DOL just to make sure. I am positive you are ok as far as federal laws go.

    Good luck!

    Nae
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  • Sharon McKnight SPHRSharon McKnight SPHR 737 Posts
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    [quote=shargold;716839]We are setting up a new monthly performance incentive program for all hourly employees, based upon productivity and other benchmarks we have established.

    We are stating that employees are eligible only if they were employed during the entire month in which the bonus is based AND if they are still currently employed on the date the incentive is paid out.

    We plan to pay out by the 3rd pay period of the following month, but I am concerned about employees who may resign or are terminated before we actually pay out the bonus. Can we deny them payment? Is this legal?

    Thanks for your guidance![/quote]

    Looks like this is a non-discretionary plan and, as such, may require a recalculation of OT during the activity period (for anyone who receives a payout). I recommend that you check with your payroll department to make sure they can manage this.

    Best wishes for success with your new plan!
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  • ACU FrankACU Frank 2,188 Posts
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    Also, be very careful about the language you use. You referred to it as an "incentive plan", which is probably the best term to use. Do not use the word commission - in many states, this will come back to bite you.
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  • bethkbethk 216 Posts
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    We have an incentive program that pays the second pay period in the month following each quarter. We don't cut a check to someone who is no longer employed and if they're not a manager the full quarter, we pro-rate the incentive check. We're in Oregon and as far as I know, this has been the program for many years.

    Beth
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