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Texas Payroll/Personnel Resource

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Recruitment and Retention Bonuses
Retention Bonus

Agencies, excluding institutions of higher education, may pay employees a one-time bonus of no more than $5000 for a retention bonus.

To be eligible to enter into a contract for a retention bonus, the employee must have already completed at least 12 months of service in a classified position with the agency before the contract.

The employee must complete another 12 months of service with the agency before the payment can be issued in the month following the completion of service.

Like the recruitment bonus, the additional compensation is considered on a case-by-case basis.

Example:

A classified employee works for 12 months, then signs a retention bonus contract. The employee must work another 12 months before he is paid the bonus. The bonus will be paid the following month (13th month).

A retention bonus does not constitute “compensation” for purposes of retirement, so:

  • Member retirement contributions may not be deducted from the bonus.
  • The bonus may not be considered when determining the amount of the state’s contribution to the Employees Retirement System.

Additionally, a retention bonus is not considered to be “salary and wages,” so:

  • Member retirement contributions may not be deducted from the bonus.
  • The bonus may not be considered when determining the amount of the state’s contribution to the Teacher Retirement System or the optional retirement program (ORP).

Source

Texas Government Code, Section 659.262.