Policy Number: 3.05 - Compensation
Efft. Date: 9/25/00 Rev. Date:4/25/05

To establish, maintain, and administer a compensation plan for positions covered by this policy.

This is one of thirteen Pay Factors used for pay determination purposes. Agency Business Need describes the specific activities and organizational, financial, and human resource requirements that are derived from the agency’s mission.

This document outlines how agencies will implement the Compensation Management System and is the foundation for ensuring the consistent and equitable application of pay decisions. The Agency Salary Administration Plan addresses the agency’s internal compensation philosophy and policies; responsibilities and approval processes; recruitment and selection process; performance management; administration of pay practices; program evaluation; appeal process; EEO considerations and the employee communication plan. Agencies should review the plan periodically to ensure its continued conformance to state policy and applicability to the agency’s mission and organizational needs.

External:  This Pay Practice allows agency management to counter a higher salary offered by an organization outside the Commonwealth to an employee deemed critical to the agency.

Internal:  This Pay Practice allows agency management to make one counter offer to a higher salary offered by another state agency to an employee deemed critical to the agency's mission and operations.

Voluntary: Employee initiated movement to a different position in a lower Pay Band. This move may result from a competitive (recruitment) or non-competitive (employee request) process.

Makes recommendations to the Governor regarding the establishment and maintenance of a compensation plan for the Commonwealth, monitors agency compliance with the plan, and recommends corrective action when necessary in accordance with its statutory authority.

• Develops, implements, and interprets policies, procedures and guidelines on employee compensation.
• Establishes and defines the compensation plan and pay administration policies and guidelines.
• Provides the Governor and the General Assembly with salary survey results projecting market movement in salaries and pay structure
• Establishes and recommends changes to Pay Band assignments and to differentials and supplements for Roles.
• Develops, maintains and publishes salary schedules.
• Reviews agencies’ Salary Administration Plans and monitors agency implementation and activities related to pay administration taking appropriate action when agencies are out of compliance.
• Approves or disapproves agency’s requests for exceptions to the Pay Practices when circumstances justify an action outside the policy’s parameters.

• Continuously reviews agency compensation practices and actions to ensure that similarly situated employees are treated the same and that all aspects of compensation management are conducted without regard to race, color religion, gender, age, national origin, disability, or political affiliation.
• Maintains appropriate records and documentation on compensation actions.
• Enters appropriate compensation transactions in the Commonwealth's human resource information system.
• Provides documentation requested by DHRM on compensation actions.
• Provides internal and/or external training opportunities on compen-sation principles and practices to staff conducting compensation activities.

Employees’ salaries will be adjusted as provided in:

• Relevant provisions of the Appropriation Act (Budget Bill).
• This policy and other state policies with compensation provisions.

Starting pay guidelines are flexible to attract a highly skilled, competent workforce. Starting pay decisions are the responsibility of individual agencies.

• This practice applies to new hires and rehires to the state workforce.
• Salary negotiations for starting pay consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.
• Starting pay is negotiable from the minimum of the assigned Salary Range up to 15% above the applicant’s current salary. The negotiated rate may result in a decrease from the applicant’s current or most recent salary.
• If salary negotiations within 15% are unsuccessful, agencies’ may negotiate offers that exceed 15%, with the approval of the agency head or designee, when recruitment efforts result in no reasonable alternative selection. Agencies must document that pay factors were considered to ensure that an appropriate salary was offered to secure job acceptance.
• The employee’s pay may not exceed the maximum of the assigned Salary Range.

Salary negotiations for promotions consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.

• When an employee is promoted to a position in a different Role in a higher Pay Band, the promotional increase is negotiable from the minimum of the new Salary Range up to 15% above the current salary.
• Promotional salary must not be below the Salary Range minimum, even if this rate exceeds 15% above the employee’s current salary.
• Agencies also may approve exceptional promotional increases above 15% and above the hiring range minimum as long as the resulting salary is within the new Pay Band and the action is supported by the Pay Factors. Agencies must provide DHRM with documentation for any such exception.
• The employee’s pay may not exceed the maximum of the new assigned Salary Range.

Salary negotiations for voluntary transfers consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.

Voluntary Transfer–Competitive

• When an employee competes for a different position in the same Pay Band, within the same or different agency, the employee’s salary is negotiable from the minimum of the assigned Salary Range up to 15% above the current salary.
• The position may be in the same or different Role.
• In some situations, the negotiated salary may be less than the employee’s current salary
• The employee’s pay may not exceed the maximum of the assigned Salary Range.

• When an employee requests a transfer to a different position in the same Pay Band, the employee’s salary is negotiable between the minimum of the assigned Salary Range up to 10% above the current salary.
• The position must be in the same agency (or another agency under a common parent agency).
• The position may be in the same or different Role.
• In some situations, the negotiated salary may be less than the employee’s current salary.
• The increase may not exceed the assigned Salary Range.

Salaries for demotion consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.

Voluntary

An employee may request a demotion, which may be as a result of a competitive or non-competitive selection process.  Non-competitive voluntary demotions must be within the same agency (or between agencies under a common parent agency).

• The employee’s salary is negotiable from the minimum of the lower pay band up to the employee’s current salary, not to exceed the maximum of the assigned Salary Range.
• If the employee’s current salary exceeds the maximum of the lower assigned Salary Range, the agency has the option of freezing the salary for up to six months.
• After six months the salary must be reduced to the maximum of the maximum of the assigned Salary Range.

Performance Or Disciplinary

Agency management may initiate a demotion for discipline or performance reasons. (See Policy 1.40, Planning, Performance and Evaluation and Policy 1.60, Standards of Conduct.)


A Disciplinary or Performance-related Salary Action accompanies a demotion for disciplinary or performance reasons. When applied to exempt employees, Disciplinary or Performance-related Salary Actions should become effective at the beginning of a workweek.

Same Pay Band

• The employee may be assigned less responsibility in the same Pay Band.
• The agency must redefine the duties of the employee to reflect a decrease in level of responsibility.
• The salary must be reduced a minimum of 5%.
• The employee may not maintain his or her current salary or receive an increase.

• The employee may be assigned to a Role in a lower Pay Band.
• The agency must redefine the duties of the employee to reflect a decrease in level of responsibility.
• The employee’s salary must be reduced to at least the maximum of the lower Pay Band, and may be placed at any salary within the lower Pay Band as long as there is a minimum 5% reduction in pay.
• The employee may not maintain his or her current salary or receive an increase.

In Lieu of Layoff

See Policy 1.30, Layoff.

Agencies may provide temporary pay to an employee who is assigned different duties on an interim basis, or because of the need for additional assignments associated with a special time-limited project, or for acting in a higher-level position in the same or different Role in the same or a higher Pay Band, or for military pay supplements.

Temporary pay is a non-competitive management-initiated practice paid at the discretion of the agency. The effective date for beginning temporary pay also is at the agency’s discretion.

• Temporary salary adjustments that may be authorized by agency management consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.
• Temporary pay is recorded as a special rate with an identified expiration date, and is extended as necessary or discontinued when the employee no longer performs the additional assignment(s)
• The amount of temporary pay shall not be the basis for computation of promotion or leave balance payments if the employee separates.

Temporary Pay–Higher Pay Band

When temporary pay is granted for assuming the duties of a different Role in a higher Pay Band, agency management may grant 0-15% above the employee’s current salary as long as the offer does not exceed the maximum of the assigned Salary Range.

A non-competitive action in which a position is changed to a different Role in a higher, lower or same Pay Band. There is no change in position number.

Salary changes for upward, downward or lateral Role Changes consider the Pay Factors and provisions of the Agency’s Salary Administration Plan.

Occurs when a position is changed to a different Role in a higher Pay Band.

• Agency management may grant a 0% to 10% salary increase.
• The salary must be increased at least to the minimum of the higher Pay Band.
• The salary increase may not exceed the maximum of the assigned Salary Range.

• The employee’s salary remains unchanged unless it exceeds the maximum of the lower assigned Salary Range.
• If the employee’s salary exceeds the lower Salary Range maximum, the salary is maintained for a six-month period, and then must be reduced to the maximum of the assigned Salary Range.

• Agency management may grant a 0% to 10% salary increase.
• The salary increase may not exceed the maximum of the assigned Salary Range.
• A salary increase due to a Lateral Role Change is considered similar to in-band adjustment and counts toward the 10% fiscal year maximum for In-Band Adjustments

• The range of increases for individual in-band adjustments is 0% to 10% during a fiscal year (June 25 – June 24 of the following year).
• An employee may receive more than one in-band adjustment (including Lateral Role Change) within a fiscal year provided the increases do not exceed 10%. (Each percentage increase is added to the employee’s current salary.)
• The employee’s base salary must not exceed the maximum of the assigned Salary Range.
• Employees at the maximum of their assigned salary ranges are not eligible for in-band adjustments.
• Agencies may request DHRM approval of exceptional in-band increases that exceed 10% during a fiscal year when it is demonstrated that the circumstances, based on pay factor analysis, significantly exceed the criteria normally applied by the Agency’s Salary Administration Plan. Resulting salaries must not exceed the maximum of the salary range.
  
  NOTE: In some cases, agencies may wish to provide compensation to employees in a form that is not included in an employee's base pay. In-Band Bonuses provide an avenue for agencies in such situations. See "Non-Base Pay Options" below.

In-Band Adjustment Change In Duties

In-Band Adjustment Professional/Skill Development

In-Band Adjustment Retention

• employees in occupations that have high value in the labor market when salaries have not been competitive with the marketplace. In such cases, the adjustment is normally granted to all employees in a particular occupation or functional area to avoid turnover.
• individual employees who are assigned to key functions.

In-Band Adjustment Internal Alignment

An increase of 0-10% may be granted to align an employee’s salary more closely with those of other employees’ within the same agency who have comparable levels of training and experience, similar duties and responsibilities, similar performance and expertise, competencies, and/or knowledge and skills.

Agencies may provide competitive salary adjustments to employees who are deemed critical to the agency's mission and on-going operations when the employee receives a job offer from another state agency (internal competitive salary offer), or from outside of state government or other entities not subject to the Virginia Personnel Act (external competitive salary offer). A competitive offer may not occur within an agency. When providing competitive salary adjustments, agencies should consider the following guidelines:

• Determine that the written offer or other verification is legitimate; and
• Assess the criticality of retaining the employee, the impact on agency operations if the employee separates and the difficulty in recruiting to replace the employee.

When an employee receives a higher salary offer in the same or higher Pay Band from another state agency, there can be only one counter offer from the current agency.

• The amount of the competitive offer may not exceed the amount of the job offer from the other agency, or the maximum of the current assigned Salary Range.
• The other state agency may not make a second offer in response to the current agency’s counter-offer.
• At agency discretion, employees may return to their former position within thirty days at their former annual salary or at the salary offered by the former agency in the competitive offer process.

External Competitive Salary Offer

• When an employee receives a salary offer from an organization external to the Commonwealth (private, not-for-profit, public non-state agency, or State non-classified), the employing agency may make a competitive offer not to exceed the amount of the job offer, or the maximum of the assigned Salary Range.
• If an agency accepts an employee’s request to rescind his or her resignation within 30 calendar days of separation, the employee’s salary may be reinstated at an amount held at the time of separation or at the salary offered by the agency in the competitive offer process.

In-Band Bonuses allow agencies flexibility to provide additional compensation to employees without adjusting employees' base pay. Bonuses offer an option when:

• a bonus is more appropriate than a base pay adjustment; or
• management is addressing budget constraints but is able to fund non-base adjustments in the current fiscal year.

In-Band Bonuses may be provided for the following reasons:

• Change in duties
• Professional/Skill Development
• Retention
• Internal Alignment

NOTE: In-Band Bonuses for changes in duties or internal alignment should be used only when, due to budget constraints, the agency requires time to develop budget options to fund base pay adjustments.

Agencies should consider the Pay Factors and provisions of the Agency’s Salary Administration Plan when providing in-band bonuses.

• The range for an individual in-band bonus is 0% to 10% during a fiscal year.
• An employee may receive more than one in-band bonus (or in-band adjustment or Lateral Role Change) within a fiscal year provided the combined bonuses and salary increases do not exceed 10%.
• Employees at the maximum of their assigned pay band are not eligible for in-band bonuses. Agencies using Sub-Bands may grant in-band bonuses to employees’ at the maximum of their Sub-Bands.  However, employees may not be granted in-band bonuses if the maximum of the Sub-Band also is the maximum of the Pay Band.
• Agencies may request DHRM approval of exceptional in-band bonuses that exceed 10% during a fiscal year when it is demonstrated that the circumstances, based on pay factor analysis, significantly exceed the criteria normally applied by the Agency’s Salary Administration Plan.

Exceptional incentive options are reserved exclusively for situations where employees are extremely difficult to recruit and retain and critical to the agency’s mission and ongoing operations. (See Attachment C.)

These practices apply to new hires to state government (recruitment) and current employees (retention).

All salary actions require the consideration of the Pay Factors.

• Agencies may use these options individually or select a number of options to use in combination with each other.
• Agencies may use these options in conjunction with the Commonwealth’s pay practices when appropriate.
• Agencies determine whether positions, Roles and/or Career Groups are to be provided Exceptional Recruitment and Retention Incentive Options. This determination is based on criticality to agency mission, significant recruitment and retention difficulties, and similarity to incentives used in the related labor market.
• Agencies choosing to use Exceptional Recruitment and Retention Incentive Options must coordinate these options with the appropriate Cabinet Secretary and notify the Department of Human Resource Management (DHRM).
• Agencies should decide on an internal approval process to access these Exceptional Recruitment and Retention Incentive Options.

Agencies must review and reevaluate the need to continue these Exceptional Recruitment and Retention Incentive Optionsat leastannually based on market availability and the type of competition that exists in the labor market.  (See Human Resource Management Manual, Appendix I.)

Sign-On Bonuses are used to encourage individuals to accept employment in specific critical positions, Roles, or Career Groups.

• Agencies must identify positions, Roles and/or Career Groups eligible for a sign on bonus.
• Agencies may offer a sign-on bonusof up to $10,000 to new employees who accept employment in these positions.
• The new employee must agree to work for the Commonwealth and remain with the employing agency for a period up to one year.
• Agencies must establish a schedule of payment, either one lump sum payable at hiring or divided into two or more payments.
• A formal written agreement, which includes requirements for satisfactory performance and duration of employment, must be executed with each employee outlining payback terms if the agreement is not met.

NOTE: Before an agency enters into an agreement, the agreement should be reviewed and approved by the Office of the Attorney General.

Retention Bonuses are used to encourage current employees to remain in specific critical positions, Roles, or Career Groups.

• Agencies must identify positions, Roles and/or Career Groups eligible for a retention bonus.
• Agencies may offer a retention bonusof up to $10,000 during a fiscal year to current employees.
• The employee must agree to work for the Commonwealth and remain with the employing agency for a period up to one year.
• Agencies must establish a schedule of payment, either one lump sum payable at hiring or divided into two or more payments.
• A formal written agreement, which includes requirements for satisfactory performance and duration of employment, must be executed with each employee outlining payback terms if the agreement is not met.
  
  NOTE: Before an agency enters into an agreement, the agreement should be reviewed and approved by the Office of the Attorney General.

Project-Based Incentives are used to encourage individuals in specific positions, Roles, or Career Groups to remain employed for the duration of key projects that are critical to the agency's operation or mission.

• Agencies must determine valid projects that are critical to the agency’s operation or mission, identify participants (positions, Roles, and/or Career Groups) eligible for the incentive bonus, and develop project plan/milestones to identify the timing of payments.
  NOTE: Agencies should use PSP100 to identify projects that are eligible for Project-Based Incentives.
  
• Project-Based Incentives may be paid at the completion of the project, or in increments upon the completion of identified milestones. The amount an employee can receive for a Project-Based Incentive may not exceed $10,000 per fiscal year for any project or cumulatively for milestones completed on a project.
• The employee must agree to work for the Commonwealth and remain with the employing agency for a period of one year or more, depending on the length of the project
• A formal written agreement, which includes requirements for satisfactory performance and duration of employment, must be executed with each employee outlining payback terms if the agreement is not met.
  
  NOTE: Before an agency enters into an agreement, the agreement should be reviewed and approved by the Office of the Attorney General.

Compensatory Leave incentives are intended to encourage employees to remain in specific critical positions, Roles or Career Groups.

• Agencies must identify positions, Roles and/or Career Groups eligible for compensatory leave incentives.
• Agencies may extend indefinitely the time period for compensatory leave to be used by employees who occupy these positions.
• Agencies must document any extensions authorized and retain information in the agency files.
• Agencies may pay off compensatory leave balances to this designated group of employees rather than allowing the time to accrue.

Annual Leave incentives include: (1) providing additional annual leave, (2) advancing annual leave based on repayment from future accruals, or (3) paying employees for a portion of their existing annual leave balances. These incentives are intended to encourage individuals to accept or continue employment in or current employees to remain in critical positions, Roles, or Career Groups.

• Agencies must identify positions, Roles and/or Career Groups eligible for annual leave incentives.
• Agencies may provide up to 30 days (240 hours) of annual leave per leave year to new and existing employees as an incentive to accept or continue employment, or retain employees in these positions. For new employees, agencies should negotiate the exact amount of annual leave that will be provided at the beginning of employment and enter this amount into the leave system.
• Agencies may advance annual leave, up to 30 days (240 hours), rather than providing additional annual leave. In such cases further leave accrual would be delayed until the employee has worked enough pay periods to have earned the amount of leave advanced.
• Agencies may elect to pay off any existing accrued annual leave hours, negotiating with the employee the amount of leave balances to be paid. Agencies should encourage employees to retain an annual leave balance to cover unforeseen situations that may arise and in which the employee may need to use this leave time.
• A formal written agreement, which includes requirements for satisfactory performance and continued employment for at least one year, must be executed with each employee outlining payback terms if the agreement is not met.
  NOTE: Before an agency enters into an agreement, the agreement should be reviewed and approved by the Office of the Attorney General.

• Agencies must identify positions, Roles and/or Career Groups eligible for referral program incentives.
• Agencies may implement a Referral Program in which agency employees are eligible to receive a payment of up to $1,500 for referrals that result in hiring external job applicants in these positions.
• External job applicants are those who are not employed by any agency in any branch of Virginia state government. Referred applicants must not have an active job application on file with the agency.
• Agencies may determine the payment schedule, whether paid as a lump sum or several payments, for referral bonuses; e.g., one half of the referral payment may be paid once the applicant has been hired and begins work, with the remainder paid once the applicant completes the probationary period.
• To receive payment, referring employees must be employed in classified positions and working in a state agency at the time the referral payments are due. If bonuses are scheduled over several payments, the referring employee must still be working as a classified employee in a state agency to receive any subsequent payments.
• Hiring managers/supervisors and agency recruiting staff are not eligible to participate in the referral program.

The following procedures shall be followed when implementing the Referral Program.

• The referring employee forwards written notification of the referral with application/resume of the applicant to the agency’s Human Resource office.
• The Human Resource office confirms the referral in writing.
• Once an applicant is hired and begins work, the Human Resource office obtains authorization for the referral payment(s), verifies the referring employee's eligibility, and forwards the information to the agency payroll office.
  
  NOTE: In cases where referrals were made by employees of other agencies, the agency should forward this information, along with the funds for the referral payment, to the fiscal office of the referring employee's agency. Payment then is made to the employee from these funds.
  
  If payments are made in multiple payments, the Human Resource office authorizes any subsequent referral payments as described above in accordance with the agreement.

From time-to-time agency business (staffing or operational) needs may require the movement of staff. Reassignment Within the Pay Band is the management-initiated action that is used for this purpose. Under Reassignment Within the Pay Band:

• Employees may be moved (reassigned) to different positions within the same assigned Salary Range.
• The position to which an employee is reassigned may be in the same or a different Role within the same Salary Range.
• The employee's base salary is not changed as a result of the reassignment.

When an agency is experiencing staffing problems for a Role a request for Rebanding may be proposed to DHRM or the General Assembly may initiate a study. The Human Resource Management Manual provides guidelines. The effective date for Rebanding normally will be June 25, unless a different effective date is approved by the Secretary of Administration and the Secretary of Finance because of an emergency situation.

Differentials are authorized by DHRM to provide payments as base pay adjustments to make salaries more competitive with the market. Differentials may be applied to Roles, Standard Occupational Classification (SOC) Titles, Work Titles, or Pay Areas or be based on geographic locations.

Authorized differentials include:

• Competitive differentials based on local market conditions. (Although this issue may be addressed through other means such as Alternate Bands.)
• Out‑of‑State differentials that apply to individuals hired by the Commonwealth in areas outside Virginia.

Proposals for additional differentials must be submitted to DHRM with appropriate documentation. (Refer to the Human Resource Management Manual, Chapter 9 for additional information about differentials.)

When an employee moves from one position to another, any differential that might apply to the former position is removed if it does not apply to the new position.

Supplements are non-base-pay payments that apply to specific positions under certain circumstances. Supplements apply to situations where employees are doing something in addition to what is normally expected of employees in similar jobs. Supplements are designed to address unique needs of an agency and often reflect market practices used for similar jobs. Supplements are not added to an employee's base pay, but are processed through payroll as "special payments."

Call-Back Pay

If employees are called back to work during non-work hours, agencies may choose to pay them for a minimum number of hours, even though the employee actually may have worked less than the specified minimum time.

Camp

Supplement paid to employees for days spent at summer camp supervising the activities of mentally disturbed children.

Medication

Supplement paid for hours or shifts spent dispensing medication by employees who have completed required training - but whose Roles do not normally require dispensing medication.

On-Call

Agencies may choose to provide this supplement to employees who are required to be available to return to work. For non-exempt employees, if the on-call assignment is so restrictive that it prevents the employee from effectively using the time for personal benefit, the time may be considered work time and on-call payments do not apply. Otherwise, on-call duty is not considered work time. On-call pay must be included in the non-exempt employee's regular rate of pay when computing overtime liability.

Shift Pay

This supplement generally is used when an agency has a demonstrated need based on staffing problems or market conditions for shifts that do not conform to the first shift, or 8:00 a.m. to 4:00 p.m. The amounts may vary depending on the shift assignment and whether employees are assigned fixed or rotating shifts.

Agencies should maintain documentation that supports

• The rationale for the supplement;
• The circumstances under which the supplement will be paid; and
• The amount of the supplement.

All former employees' salaries will be established according to the Starting Pay provisions of this policy.

• Return to the same position results in a salary equivalent to that held at the time of LWOP.
• An agency may provide a higher salary if the employee has attained significant experience or training in the same or similar occupation while on LWOP.

Short Term Disability

Return to the same position results in a salary equivalent to that held at the time of short-term disability, including any increases for which the employee may be eligible.

Long Term Disability (Working)

Return to active employment (as defined by the VSDP) in the employee’s position results in a salary equivalent to that held prior to long-term disability, including any increases for which the employee may be eligible. For VSDP purposes, active employment will be considered when there is:

• full-time return to the original job with modified duties; or
• at least 50% return to the original job with or without modified duties.

Long Term Disability

Return to classified employment from LTD normally must be through the competitive recruitment process. Former employees’ salaries will be set according to the Starting Pay provisions of this policy.

However, when an employee is medically released as fully able to return to work, the agency may reinstate the employee to the position and salary held prior to disability without competitive recruitment. Such placement may occur under the following conditions:

• placement is made within a reasonable timeframe;
• the employee’s position has not been filled; and
• the agency considers the position to be a valid vacancy.

The Department of Human Resource Management issues this policy pursuant to the authority provided in Chapter 12, Title 2.2 of the Code of Virginia.

The Director of the Department of Human Resource Management is responsible for official interpretation of this policy, in accordance with section 2.2-1201 of the Code of Virginia.

Questions regarding the application of this policy should be directed to the Department of Human Resource Management's Division of Agency Human Resource Services

The Department of Human Resource Management reserves the right to revise or eliminate this policy.

• Policy 1.40, Performance Planning and Evaluation
• Policy 1.60, Standards of Conduct
• Policy 2.05, Equal Employment Opportunity
• Policy 2.10, Hiring
• Policy 3.10, Compensatory Leave
• Policy 4.10, Annual Leave
• Policy 4.57, Sickness and Disability Program