Incentive Pay

In creating a Washington DC office and not being able to entice qualified employees to uproot themselves to run the office, we had to offer an incentive bonus of $110,000 to Donald to relocate for the estimated five year period. We examined numerous sources to determine a range of what was considered to be an acceptable incentive package and learned that 100% of salary at the time was typical in the private sector. In our Google search, we also discovered that the federal government, most federal agencies and many state and local governments also provided incentive relocation packages to new and existing employees. For example, the federal Office of Personnel Management provides incentive pay equal to 25 percent of base pay multiplied by expected years of service not to exceed 100% of pay while the Department of Defense offers a relocation incentive plan with a similar calculation of benefits (Exhibit 1, not presented here). A Google search of relocation incentive pay demonstrates similar widespread use of incentive pay equal to 100% of base pay in numerous other federal, state and local agencies. It should be emphasized that this incentive pay is separate from allowable relocation costs which are covered by FAR 31.205-35 for government contractors.

Donald’s payment of $110,000 represents 72% percent of his base salary, an amount significantly less than maximum amounts allowed by the government and practices common in industry. Even if the entire amount of $110,000 was attributable to incentive relocation pay that amount would be far less than even the federal government allows for its employees. However, part of the payment is for allowable relocation costs.

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