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Compensation And Development Policy Template

This template provides a basic structure for your employee compensation and development policy.


As much as you love this job, you’re here for a paycheck – we get it. So in our employee compensation and development policy we’ll dive into how exactly you’re compensated! Plus, all the other ways we invest in you, including:

  • Overtime
  • Payroll
  • Performance management
  • Employee development and training expectations


Our employee compensation and development policy applies to [all full-time and part-time employees] of the company as well as any parties that represent the company or undertake tasks on its behalf.

What is employee compensation?

Employee compensation is everything (money and non-money payments) that you get in exchange for the work you do. So, on top of your regular paid wages, compensation also refers to benefits and perks.

What is professional development?

Professional development refers to any opportunity that helps you build the knowledge or skills you’ll need to advance your career.

Our employee compensation and development policy

Our employee compensation and development policy is designed to ensure you are getting compensated competitively and fairly for the work you do. Please, families yourself with your compensation status, how our pay structure works, and the other development opportunities available to you.

Compensation Status

There are two types of employees under FLSA guidelines:

  • Non-exempt employees, who are covered by the FLSA’s minimum wage and overtime provisions.
  • Exempt employees, who aren’t covered by the FLSA because they are:
  • Paid at least [$23,600] per year ([$455] per week)
  • Paid on a salary basis
  • Perform exempt job duties (“executive,” “professional” and “administrative.”) Most employees must meet all three criteria to be exempt

If you are unsure as to whether you should be exempt or not, please ask HR to clarify your status.

The FLSA excludes some types of jobs (e.g. railroad workers, truck drivers) because they are covered by other federal laws. Some other workers, like outside salespeople, are excluded by definition. Feel free to ask HR for clarifications any time.

Recording time worked

The requirement to track employee time is separate and distinct from the need to report time for payroll payment purposes. FLSA requires that a record of total hours worked each day be maintained for all employees considered non-exempt.

The “Time Tracking Record” is an appropriate mechanism for use in tracking time. Records must:

  • Ensure the non-exempt employee records hours worked on a daily basis
  • Provide for an employee and supervisory sign-off on a (at a minimum) weekly basis
  • Provide for the maintenance of the record for at least three years at the departmental level. In the event that this form is used in an electronic manner, the use of the email address will be required as the signature authority for the transaction

Employees on Fixed Schedule: A non-exempt employee may keep a record showing the exact schedule of hours and merely indicate whether he/she followed the schedule. Where variances to the fixed schedule occur, actual hours worked for that day must be recorded. Using the Time Tracking Record:

  1. A Time Tracking Record must be maintained for each non-exempt employee. The Time Tracking Record can be kept on paper or electronically
  2. Time worked must be tracked daily, by the employee, and recorded to the nearest tenth of an hour. Time worked can be designated as “H” (such as, 8.0H)
  3. Leave time may also be tracked. Although it is not required by FLSA or policy, it may be helpful to include it. The following legend can be used to note various leave time types:
  4. V – Vacation
  5. S – Sick
  6. P – Personal
  7. FV – FMLA vacation
  8. FS – FMLA sick
  9. C – Compensatory time
  10. U – Unpaid
  11. O – Other (jury duty, union meeting, and more)
  12. Employees must sign or initial the time tracking record
  13. Supervisor must review and verify by signing or initialing the time tracking record on a weekly basis
  14. Time Tracking Record can be used as the basis for reporting time worked and leave taken into the CATS system for payroll processing
  15. Time Tracking Records must be retained at the departmental level for three years from the date of creation


Occasionally, we may need you to work more than your regular working hours. We will pay for overtime work according to local and national laws.

[Insert this if employees are in the U.S: If you are an exempt employee, you are not entitled to overtime pay by federal law. In the event that an exempt employee must work overtime, we will set a cap for overtime hours at [10 hours per week] to prevent overworking and burnout.

If you are a non-exempt employee, you are entitled to overtime pay of one and a half times your wage. Please record your overtime hours accurately, so we can calculate your pay correctly. We also ask you to work overtime only after it’s authorized by your supervisor to make our record-keeping easier.]


This section is super straightforward. You get paid (your salary or wage) [biweekly on Fridays/on the 15th and last day of every month].

If you are hourly, be sure to track all your hours using [our timesheet software]. That way, we can compensate you for all your hard work.


Our employee bonus policy explains how our company distributes bonuses to employees. We want to reward employees whenever possible since we all contribute to our company’s success with our hard work. This policy clarifies how we choose which employees to reward and how we calculate bonus amounts.

This policy applies to all regular full-time and part-time employees and employees with contracts of [one year and more.] Seasonal employees, interns and temporary employees with a contract of less than [one year] are not eligible for bonuses.

We may modify this policy and our bonus plans at any time without notice.

Only written promises of bonuses will be considered valid. If your manager or another executive verbally promises you a bonus, they can not follow through unless they put it in writing and HR approves it.

Bonuses can be either discretionary or non-discretionary:

  • Discretionary bonuses are determined at our company’s sole discretion. They aren’t promised to employees and we can’t guarantee anyone will receive them. For example, we may pay a bonus to reward an employee who showed exemplary performance at a particular time
  • Non-discretionary bonuses are promised or announced to employees and guaranteed to those who meet our established criteria for the bonus. For example, we may promise to pay non-discretionary bonuses to reward teams for meeting specific targets

One important difference between discretionary and non-discretionary bonuses in the U.S. is that non-discretionary bonuses must be included in overtime pay calculations. Our company will follow its legal obligations.

Bonus Structure

Our company rewards employees for outstanding individual performance, as well as their contributions that help us achieve company goals. For this reason, we award bonuses in three forms:

  • Lump-sum bonus
  • Year-end bonus
  • Incentive plans

Lump-sum bonuses

Our company may award lump-sum bonuses (one-time bonus payments) to employees who show exemplary performance. We define “exemplary performance” as:

  • Exceeding goals, either financial or non-financial
  • Performing additional duties from what is expected
  • Serving as a good example of professional behavior to other employees (e.g. teamwork, ethics, leadership)

When managers know their team member deserves a bonus, they should send a formal written recommendation to their Department Head and HR, explaining how their team member showed exemplary performance.

HR will:

  • Review and approve recommendations with the input of Department Heads based on the available budget. Lump-sum bonuses cannot exceed [10% of base salary/$2,000]. Bonuses [for executives/that exceed $1,000] need to be approved and signed by [CEO/President]
  • Send a formal letter to the team member who showed exemplary performance congratulating them and informing them that they will receive a bonus
  • Coordinate with the Finance Department to arrange for paying bonuses on time. Employees should receive their bonus within [the next 2 pay periods/one month after approval]

Lump-sum bonuses are discretionary.

Year-end bonuses

Our company’s policy gives the executive team the ability to decide on year-end bonuses for all employees. There are 2 conditions for this bonus:

  • Our company should have exceeded its annual financial goals
  • The board of directors must approve the bonuses

If these 2 conditions are satisfied, then our company will give bonuses to employees who:

  • Are employed by our company on the day when the bonus must be paid
  • Have not announced they intend to resign either verbally or in writing
  • Have received at least satisfactory performance reviews.

We will pay out bonuses according to this tiered system:

  • Employees who were employed by our company for the entire year will receive a year-end bonus payment of [10%] of their annual salary
  • Employees who are employed for at least [6 months] will receive a prorated amount
  • And employees who are employed for fewer than [6 months] will receive a [2.5%] bonus

Incentive plans

Our company may set up incentive plans at the beginning of each year. These plans may involve:

  • Incentive bonuses to encourage employees to achieve annual company financial goals. These are company-wide bonuses that may be announced at the beginning of the year by senior leaders. [These bonuses may be calculated with a tiered system (for example, 5% for hitting 80% of the goal, 10% for hitting the goal and 20% for exceeding the goal).] HR should give a formal payout plan to each employee
  • Incentive bonuses for achieving or exceeding individual and team targets. Department heads are responsible for formulating these plans and setting specific goals. For example, they may decide to pay a quarterly bonus (a percentage of individual sales) to sales teams that exceed their sales or revenue targets. Department heads should submit their plan to HR and the CEO for approval [within the first quarter of the year]

Keep in mind that bonuses are subject to taxation (local, state and federal taxes).

Employee training and professional development

We owe our success to our employees. To show our gratitude, we will invest in your professional development. We want you to feel confident about improving your efficiency and productivity. We also want to help you achieve personal growth and success.

Each employee has [$1,000] annually to spend on educational activities or material. Subscriptions and books are included in this budget unless they are necessary for you to complete your everyday duties. Send your expenses to HR [by email/ expenses software].

Apart from online courses, we offer these training opportunities:

  • Formal training sessions (individual or corporate)
  • Employee coaching and mentoring
  • Seats at industry conferences
  • On-the-job training
  • Job shadowing
  • Job rotation

Professional Development is a collective process. Team members and managers should regularly discuss learning needs and opportunities. And it’s HR’s responsibility to facilitate development activities and processes.

Questions? Comments? Concerns?

Have a question about this policy? Reach out to [HR contact].

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Compensation And Development Policy Template

This template provides a basic structure for your employee compensation and development policy.

Organize the chaos
of your small business