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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Non-Salary Payments
Recruitment and Retention Bonuses

Background

One of the most critical issues facing state agencies is the recruitment and retention of competent classified staff.

State agencies may use recruitment or retention bonuses to provide additional financial incentives to attract, hire or retain eligible key classified staff whose unique skills or abilities are vital to achieving significant agency goals.

Recruitment and retention bonuses may be used to staff:

  • Critical positions,
  • Positions with high turnover rates, or
  • Positions with a shortage of qualified applicants.

Note: Recruitment and retention bonuses have no effect on merit and one-time merit eligibility.

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Eligible Employees

Hourly, part-time, temporary and regular, full-time salaried employees may be eligible for a retention or recruitment bonus.

Based on the following criteria, the agency’s chief administrator must consider — on a case-by-case basis — if additional compensation is warranted:

  • Evidence the employee and/or position are critical to the operations of the state agency.
  • Evidence of high turnover rates among employees filling the position or an extended period during which the position is or has been vacant in the past.
  • Evidence of a shortage of employees qualified to fill the position or a shortage of qualified applicants.
  • Other relevant factors.

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Bonus Certification and Documentation

Before entering into a contract to pay a recruitment or retention bonus, the chief administrator of a state agency must certify in writing to the Comptroller’s office the reasons why the additional compensation is necessary.

The documentation for both recruitment and retention bonuses must include the employee’s:

  • Name,
  • Last four digits of his or her Social Security number, and
  • Bonus amount

If the employee information for the recruitment bonus is unavailable when the letter of certification is submitted to the Comptroller’s office, the agency must provide the information when the position is filled.

The letter of certification for either bonus must be received by the Comptroller’s office before an agency can enter into a contractual obligation with an individual. The letter must be submitted to:

Comptroller of Public Accounts
Fiscal Management Division, Payroll Policy
111 East 17th Street, 9th floor
Austin, Texas 78774

To submit your request electronically, please send a letter on agency letterhead to payroll.policy.mail@cpa.texas.gov.

The Comptroller’s office will notify the agency when its certification letter has been processed.

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Recruitment Bonus

Agencies, excluding institutions of higher education, may pay employees a one-time bonus of not more than $5000 for a recruitment bonus.

A recruitment bonus does not constitute “compensation” for purposes of retirement. Therefore:

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

A recruitment bonus is not considered to be “salary and wages.” Therefore,

  • Member retirement contributions may not be deducted from the bonus, and
  • 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).

Condition of full refund

If the employee discontinues employment for any reason less than three months after the date of receiving a bonus, the employee must refund the full amount of the bonus to the agency.

Condition of pro-rated refund

If the employee terminates employment for any reason, within three months or longer but less than 12 months after receiving the bonus, the employee must refund to the state agency a pro-rated amount, calculated by:

  1. Subtracting from 12 months the number of complete calendar months the employee worked after the date of receiving the recruitment payment.
  2. Dividing the number of months remaining by 12 months.
  3. Multiplying the result of Step 2 by the amount of the recruitment payment.

Examples: (based on gross bonus amount)

Example 1

A network specialist hired on Dec. 3, 2013, is offered a $2000 recruitment bonus contract. The network specialist agrees to the bonus and signs the contract. The employee terminates on Feb. 28, 2014, completing two months of continuous service after receiving the bonus.

The employee must pay back the entire $2000 bonus.

Example 2

A systems analyst hired on Nov. 1, 2013, is offered a $2000 recruitment bonus contract. The systems analyst agrees to the bonus and signs the contract. The employee terminates on March 31, 2014, completing five months of continuous service.

The refund the employee must pay is calculated as follows:

  1. 12 - 5 = 7 months remaining
  2. Divide the number of months remaining by 12 months: 7/12 = .5833
  3. Multiply the result in Step 2 by the amount of the recruitment payment: .5833 x $2000 = $1166.67

The employee must refund the state agency $1166.67.

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Further Considerations on the Refund of a Recruitment Bonus

  1. A state employee who works part of a month and is on leave without pay (LWOP) for the remainder of the month is considered to have worked the entire calendar month.

    However, a state employee who is on LWOP for an entire month is not considered to have worked the entire calendar month.

  2. An employee who is transferred to another agency, through legislative action or by an agency’s statutory authority to transfer individuals, is:
    • Not considered to have terminated employment, and
    • Is not required to refund the recruitment bonus.

    This individual would not be eligible for another recruitment bonus as a result of a legislative transfer into the new agency.

    An employee who is hired into a classified position and is later promoted or moved to another classified or unclassified position within the same agency is not considered to have lost entitlement to the bonus.

  3. The recruitment bonus is subject to:
    • Federal income tax (FIT) at the supplemental rate, and
    • Federal Insurance Contributions Act (FICA) withholdings.

    If all or part of the recruitment bonus is refunded during the same calendar year in which it was paid, then adjustments must be made to FIT and FICA withholdings.

  4. If an employee fails to refund a recruitment bonus as required by law, the state agency to which the refund was owed must consider recovering the bonus by payroll deduction from a lump-sum payment of accrued vacation leave, or other appropriate means.

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Retention Bonus

Agencies, excluding institutions of higher education, may pay employees a one-time bonus of not 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 prior to 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. Therefore:

  • 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.” Therefore,

  • 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)

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Additional Resources

To learn more about entering this special pay, see Chapter 10 “Special Pays” of the USPS Process Guide or the Entitlement Code Table in Appendix A of the SPRS User Guide.

Sources

Texas Government Code Annotated, Section 659.262

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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