SUBJECT:

New Guidelines for Funding and Paying the Employee Incentive Awards

A new systemwide assessment procedure for funding and paying Employee
Incentive Awards was recently announced by the Office of the President,
effective 7/1/96. This procedure has been developed to ensure consistent
treatment by individual payroll funding sources in implementing the
Incentive Award Program (IAP) while promoting compliance with federal
contract and grant regulations and collective bargaining provisions.

Under the new procedure, all eligible payroll fund sources will be assessed
an amount equivalent to approximately 1.3% of applicable monthly salaries
using the base Payroll/Personnel System (PPS) for fiscal year 1996-97. The
assessment will be implemented in September, therefore, the actual
assessment will be prorated over ten months. This amounts to 1.56% of
applicable salaries for the period 9/1/96 - 6/30/97 to achieve the
equivalent funding level of a 1.3% assessment for the entire year. The
assessment rate may differ from year to year, but will be the same for all
funds in any given year.

The funds made available by the assessment will be used to pay the cost of
the actual awards, including the cost of fringe benefits associated with the
awards (employer share of FICA, Unemployment Insurance, Workers Compensation
Insurance). Under this method, all employees eligible for the Incentive
Awards are treated equally regardless of the funding sources of their
regular pay.

AFFECTED POPULATION
All non-academic employees (career, casual and casual/restricted) are
eligible to participate in the IAP program and are therefore covered by the
provisions of the IAP assessment plan, except for the following:

  -  employees in per diem appointments

  -  employees in certain bargaining units, depending on the provisions
   of their bargaining contract. Eligibility will be determined at
   the conclusion of each bargaining cycle. Currently, no
   non-academic bargaining unit is exempt from the assessment,
   although represented Systemwide Technical Unit employees are not
   eligible to receive awards pending agreement between UC and UPTE.

  -  employees with contract appointments

  -  employees in the Senior Management Group (previously categorized as
   Executive program), and

  -  students paid on work study funds.

Awards may be made to Senior Management Group employees and to contract
employees if so specified in the employment contract, however, they will
not be paid from the IAP assessment fund.

FORMS OF AWARD
Forms of award will include cash bonuses paid directly to employees as
taxable earnings, and professional development awards, including payment of
position-related or career-related development activities and associated
travel expenses. Other forms of award (paid time off, cash-equivalent
gifts, gift certificates) may not be funded by the assessment plan. These
may be funded outside of the 1.3% assessment subject to Vice Chancellor and
department guidelines.

FINANCIAL SYSTEM RECORDS
All regular pay of eligible employees will be assessed. Automated entries
will be made by the PPS to record the assessment, the payment of cash
incentive awards, and the reimbursement of the salary and benefits
sub-accounts from the assessment fund. The Distribution of Payroll Expense
report will be modified to reflect the assessments and payments, except for
professional development awards. Professional development awards will be
paid through the Accounts Payable system by making a direct charge to the
reserve account via a Check Request form for all payments, including travel.

REPORTING
Each Vice Chancellor area will continue to provide detailed reports of
expenditures at the end of the fiscal year.

FUND MANAGEMENT
Campus-wide total annual value of the Incentive Awards granted should
approximately equal the total annual assessments. Year-end surplus
balances will be carried forward. Vice Chancellors will be provided an
entitlement figure, applicable in total and by fund, which cannot be
exceeded to ensure the account is not overdrawn at year-end.

FEDERAL REQUIREMENTS
The costs of the Incentive Awards are federally allowable if the award
program is conducted in a consistent manner throughout the campus, without
regard to funding source, unit or organization, and does not unfairly
disadvantage the Federal Government. To ensure the allowance of these
costs under federal rules, campuses must make the assessment to all fund
sources, including the General Fund. At the end of each fiscal year,
campuses must demonstrate that the total incentives paid to federal fund
employees are generally equal to the total assessments made to federal
funds. Extramural project proposal budgets based on the salary and fringe
benefits projections issued by the Contract and Grant Administration office
include the estimated average cost of incentive awards. No further
adjustment to these projections is necessary.

GENERAL FUNDS
The General Fund allocation distributed by the Office of the President to
the campus for the awards program will be used to supplement the budget
appropriation of General Fund accounts as IAP assessments are made.
The following open forums have been scheduled to present additional details
regarding the new assessment procedure and answer any questions you may
have:

SIO            CAMPUS
Monday, September 30    Thursday, October 3
3:00 - 4:00 p.m.        10:30 - 11:30 a.m.
Hubbs Hall, Room 4500    RIMAC, Green Room

Business Officers, Financial Officers and Key Support Staff are encouraged
to attend.

Rogers Davis Assistant Vice Chancellor - Human Resources Donald A. Larson Assistant Vice Chancellor - Business and Financial Services