MEMORANDUM

This past legislative session the General Assembly and Governor passed legislation authorizing bonus and leave awards for state employees. Below are the state's implementation guidelines that we received this past Friday. Note: This letter only pertains to employees in the Academic Division. The Provost Office will distribute information on faculty bonuses.

Bonus and Leave Options

1. Provisions:

Generally, all salaried classified employees and research assistants must elect in writing to receive either:

1. A 2.5% bonus payment on August 30, 2002; or
2. Ten days (80 hours) of bonus leave to be used between July 1, 2002 and June 30, 2003; or
3. A combination of a 1.25% bonus payment and 5 days (40 hours) of leave.

Part-time salaried employees will be granted bonus leave in proportion to the percentage of full-time that they work. For example, a salaried employee who works 30 hours per week may select a 2.5% bonus payment, or 60 hours of bonus leave, or a 1.25% bonus payment and 30 hours of bonus leave.

The "Salaried Employee Option Election Form" is attached. Supervisors (departments) must secure an election form from every eligible salaried employee by May 24 for all salaried classified employees and research assistants to receive the award. Employees who have a choice, but who do not elect the bonus payment or leave will not be eligible. Employees may not change their elections after 5:00 pm Friday, May 31, 2002.

If an employee does not submit an election form by 5:00 pm Friday, May 31, 2002, they will not be eligible for the bonus or leave award.

University Human Resources must receive all election forms by 5:00 pm Monday, June 3, 2002.

Bonus payments will not be included as creditable compensation for determining employees' future retirement benefits.

A number of conditions and limitations affecting these general provisions are outlined below.

2. Limitations:

   Employees who participate in the Virginia Law Enforcement Officers Retirement System (VaLORS) shall receive a 2.5% bonus and will not elect an option. An Election Form is not required from VaLORS participants e.g., campus police officers. The bonus payment will be included in the August 30, 2002 pay check.

Classified employees must be rated at least "contributor" on their latest performance evaluation in order to be eligible for the bonus payment or leave. For non-classified, salaried employees, the appointing or governing authority shall certify that employees receiving the awards are performing at levels at least comparable to the "contributor" rating. (Additional information on performance evaluations is outlined in paragraph below.

Employees who elect a 1.25% or 2.5% bonus payment must be salaried state employees during May and remain on the payroll on August 30, 2002, in order to be eligible for the bonus payment. Employees who elect to receive 5 or 10 days of leave must be employed during May and remain employed on July 1, 2002, in order to be credited with this bonus leave.

NOTE: Employees who are planning to retire in the near future must retire on or after September 1, 2002, in order to receive a bonus payment. These employees must also continue to work, or be on paid leave, through August 30, 2002, in order to qualify for the bonus payment. Each employee should be advised to consider all factors relevant to his or her individual situation in deciding when to retire.

3. Bonus Leave:

   University Human Resources will input into UVA HRMS/Payroll on June 26, 27 and 28, the elected bonus leave balances of 40 or 80 hours (or prorated amounts for part-time and probationary salaried employees) so that it is available for employee use on July 1, 2002. Bonus Leave will be distinguished from other types of leave in UVA HRMS/Payroll.

   The leave may be used in increments as requested by the employee and approved by the employee's supervisor. Supervisors should approve leave unless departmental work demands require the employee to work during the requested time.

   The leave must be used no later than June 30, 2003. It cannot be carried forward and employees shall not be paid or otherwise compensated for any balance of unused leave upon leaving employment. Therefore, employees should be encouraged to use their bonus leave so that it will not be forfeited. If an employee moves to a different agency before July 1, 2003, any remaining leave balance shall be transferred for the employee's use in the new agency. University Human Resources will not approve leave balances in excess of state policy maximums or any use/lose leave resulting from an employee electing the bonus leave.
   

   NOTE: If business units have critical operations that require staff coverage, it may be likely that such staff will not be able to use 10 days of bonus leave before it lapses on June 30, 2003. In these cases, management has the discretion to require employees to select the bonus payment. Even if such employees are not required to select the bonus payment, business units must advise employees, before the employees' election of the bonus payment or bonus leave, if there is a likelihood that they may not be able to use bonus leave.

4. Salary Basis for Bonuses:

   Bonus payments will be based on each employee's base salary in effect on July 1, 2002. For this purpose, base salary is that part of the employee's annual compensation that is creditable for purposes of contributions to the Virginia Retirement System. Creditable compensation is defined as the employee's annual salary minus any overtime pay, payments of a temporary nature, or payments for extra duties such as pay to teachers for coaching and advising special activities.

5. Salaried Employees on Leave:

   Management must make every reasonable effort to contact employees who are on leave during the May1-31 election period so that their elections may be recorded. A classified employee who is on paid or unpaid leave on July 1, 2002 (for leave) or August 30 (for the bonus payment) may have his or her award affected as indicated in the chart below:

Salaried Classified Employee and Research Assistant

NOTE: The rules outlined above are based on policies that apply to classified employees.

6. Probationary Salaried Employees:

   For purposes of determining employees' eligibility for the fiscal year 2002-2003 bonus payment or bonus leave, employees hired between July 1, 2001, and April 30, 2002, will be considered probationary. Like other classified employees, these employees must be evaluated as "contributor" or higher in order to be eligible for the bonus payment or leave. Supervisors should use the Probationary Progress Review Form to document satisfactory performance.

   As indicated in the chart below, which is based on the current policy, employees hired during the first quarter of fiscal year 2001-2002 are eligible for the full bonus or leave award.

   Employees hired after the beginning of the May election period are not eligible for an award.
   

Note: The amounts of leave indicated in the chart above are for full-time salaried employees. The leave amounts should be prorated for part-time salaried employees.

7. Overtime Pay for Non-Exempt Employees:

   The August 30, 2002, bonus payments are considered discretionary bonuses. Therefore, payments to employees who are covered by the overtime provisions of the Fair Labor Standards Act (FLSA), also known as non-exempt employees, are not included in the employees' regular rates for purposes of determining overtime liability. Schools and departments need not re-compute overtime to include the bonus payments for overtime hours worked during any prior period.

8. Tax-deferring the State Employee Bonus:

   Employees who elect to receive a bonus payment on August 30, 2002, and who participate in the University's 403(b) Program and the state's 457 Plan may contribute some of, or the entire bonus to their Plan in order to avoid paying income tax on the bonuses. To contribute their bonuses to the Plan, currently enrolled participants should contact the UHR Benefits Division by July 15, 2002.

   FICA tax must be paid on the amount that is contributed and the annual maximum deferral amounts continue to apply.

   The employer cash match is not paid on the bonus. It is paid on the regular contributions made each payday.

9. Information Processing Procedures:

The University must submit to the state all classified salaried awards by June 15, 2002. If the University does not record their classified employees' elections and evaluations by the required date, then the University may not be granted bonus leave on July 1 and/or bonus payments August 30. Funding for the increases could also be affected by delinquent processing of the elections.

There are a number of situations where performance evaluations during the last performance cycle may not provide a reasonable basis for determining eligibility, and a new evaluation will need to be completed. These evaluations should be based on performance throughout the period from October 25, 2000, through the new evaluation date and should be considered official evaluations, to be retained in the affected employees' personnel files. Where needed, supervisors must complete new evaluations by May 31, 2002, so that accurate ratings may be sent to the state with the employee elections by June 15, 2002. Documentation of the reason for conducting the new evaluation should be retained with the evaluation form.

Situations that qualify for new evaluations include:

1. Employees who were hired during the fourth quarter of the last performance cycle (July 25-October 24, 2001) and who were not rated in 2001, because such ratings were optional;
2. Employees whose performance has changed significantly since the last evaluation, so that eligibility for the bonus or leave cannot reasonably be based on that evaluation;
3. Employees who were hired during the current performance cycle (current probationary employees); or
4. Other employees, who were on leave or who, for any other reason, were not evaluated for their performance during the performance cycle ending October 24, 2001.

Performance evaluations for the current performance cycle (October 25, 2001-October 24, 2002) will not provide the basis for the fiscal year 2002-2003 bonuses or bonus leave, but they will need to be completed in accordance with normal policies and procedures. Additional information on the completing the 2002 performance evaluation process will be sent to you in August. These ratings will provide the basis for establishing employees' eligibility for future management-initiated pay practices.

Wage employees are not eligible for the bonus payments or hours of bonus leave approved for salaried employees.

Questions should be directed to the UHR Compensation Division at 924-4747.