The University of Memphis

Faculty Incentive Compensation


Issued:  February 14, 2017
Responsible Official:  Vice President for Research
Responsible Office:  Office of Research Support

Policy Statement


Incentive Compensation is a form of non-guaranteed supplemental compensation for faculty members based upon research and scholarly productivity.  In no case will Incentive Compensation be charged to a sponsored project.



To reward faculty for sustained research productivity and scholarly activities.   



Individuals eligible for Incentive Compensation hold faculty rank and are paid from EDUGEN positions using Banner E-class FA or F9. For purposes of this policy, positions funded by centers and chairs of excellence are considered EDUGEN positions.

Incentive Compensation

A form of non-guaranteed supplemental compensation based in part on a negotiated percentage of Salary Recovery.

Salary Recovery

The unobligated amount of university salary budget attributable to externally funded effort.


Facilities and Administration Cost (F&A) Rate

A composite rate applied to sponsored agreements as a percentage of the sponsored agreement’s direct costs.  The federally negotiated indirect cost rates for instruction, organized research, and other sponsored activities are developed by the University in accordance with the Office of Management and Budget and the Federal Acquisition Regulation, and negotiated with the Department of Health and Human Services, Division of Cost Allocation, the University’s federal cognizant audit agency.



Incentive Compensation will be paid following each effort certification period and on or before the June 30th fiscal year end.

Faculty seeking Incentive Compensation must:  

  1. Negotiate an agreement with his/her chair and obtain approval by his/her dean;
  2. Obtain external funding for his/her base salary;
  3. Verify work performed by completing the effort certification, and complying with UM1676 Certification of Effort;
  4. Initiate payment by completing the incentive payment request form;
  5. Meet or exceed all other expectations related to his/her faculty rank. 

Incentive Compensation Agreement

The purpose of the Incentive Compensation Agreement is to create an understanding between faculty and chairs regarding a faculty member’s involvement on sponsored programs, including the disposition of salary recovery from sponsors. The incentive compensation can be negotiated at any time; however, routine negotiation should occur during the faculty annual performance review.

Historically, many departments have depended on salary recovery to operate departments. With the advent of incentive compensation, departments face a loss of operating budget. Therefore, chairs are not required to pay the maximum incentive compensation allowed by this policy. Rather, chairs are expected to negotiate an Incentive Compensation Agreement that balances the needs of the department with the need to reward faculty for sustained research productivity. Chairs may retain all of the salary recovery. The Incentive Compensation Agreement shall be reviewed and approved by the deans.  Considerations:

  1. Before incentive compensation can be paid, salary recovery must be allocated to reimburse the department for faculty replacement costs.
  2. At the discretion of the chair, salary recovery may be allocated to reimburse the department for faculty startup costs, travel, graduate assistants, or other costs of research support.
  3. At the discretion of the chair, salary recovery may be allocated to meet other departmental needs.
  4. The comment section should be used to document the course load and other assigned duties. 


Incentive compensation encourages faculty to request sponsor funding for the total cost of the project rather than volunteering to cost share effort. To be eligible for incentive pay, the external sponsor must provide funding for faculty base salary and benefits, plus the maximum F&A rate allowed by the sponsor’s formal policy.

Effort Certification

Faculty must complete an effort certification to document work on the sponsored project.  Failure to complete a timely effort certification and comply with UM 1676 Certification of Effort nullifies the incentive compensation agreement.

Payment Request

The completed Incentive Compensation Agreement & Payment Request form should be submitted to the payroll office with a copy of the certified effort report for that period.

Nullifying Conditions

If any of the following conditions occur, the incentive compensation agreement becomes null and void. If incentive compensation has already been paid when the nullifying condition occurs, faculty may return the excess payments through payroll deduction.

  1. Untimely effort certification.
  2. Retroactive significant changes to funded effort.
  3. Sponsored project over expenditure.
  4. Cost share requirements not met.


Earnings Limitations

Incentive Compensation may not exceed 50% of the Salary Recovery allocable to the period covered by the effort certification.  

Retirement Credit

The University of Memphis must control the reporting of supplemental compensation earnings to retirement systems. For retirement reporting purposes, TCA § 8-34-101(14)(D) limits credit for supplemental compensation to no more than 25% of base pay. Faculty and staff may earn more than 25% in any reporting period, but the payroll system will report no more than 25% to the Tennessee Consolidated Retirement System (TCRS) or Optional Retirement Plan (ORP), as applicable. 

Roles and Responsibilities

Principal Investigator/Program Director

  • Negotiate the incentive compensation agreement with department chair annually.
  • Comply with UM1676 Certification of Effort and UM1723 Sponsored Agreement Cost Sharing.
  • Complete sponsored agreements within budget.

Department Chairs/Directors

  • Ensure that faculty are meeting or exceeding all requirements related to his/her academic, research, and administrative responsibilities;
  • Negotiate with faculty an equitable percentage of Salary Recovery to reward sustained research and scholarly productivity.


  • Review and approve the negotiated incentive compensation agreement.


Related Forms

Incentive Compensation Agreement & Payment Request


May Faculty receive both incentive compensation and extra compensation?

Yes, but not for the same work.




UofM Effort Certification Policy

Faculty Incentive Pay Plan

Revision Dates

  UM1725 -- revised February 14, 2017
UM1725 -- issued February 29, 2012

Subject Areas:

Academic Finance General Human Resources Information Technology Research Student Affairs
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