In this Open Comment Period: Section 4 - Process Employee Recognition Awards
In this Open Comment Period we present updated policy and procedural information for processing employee recognition award payments, Section 4 – Make Employee Award Payments in ANA.
Changes to the policy include:
- Description of the eligibility, approval, payment, and funding source requirements for an employee award payment.
- Explanation of tax implications and requirements, including presentation of the award and treatment of the payment.
- Clarification that employee award payments are not compensation for actual services rendered and may not be used as a substitute for base salary increases.
- Requirement that the use of sponsored funds for awards must have prior approval by the Office of Grants & Contracts – Post Award (GCO) and the sponsor.
Policy Statement
Employee recognition award payments are not compensation for actual services rendered and may not be used as a substitute for base salary increases. Award payments are not an alternative to salary adjustments intending to recognize a significant change in position responsibilities or to address internal or external pay equity.
The awards must be part of a meaningful presentation that emphasizes employee achievements. Review IRS Publication 525 for additional information. If a certificate will be presented as part of the ceremony, the unit is responsible for generating it.
Managers, supervisors, and employees who misrepresent the purpose, fund source, or amount of an award are subject to disciplinary action, up to and including termination of employment. Disciplinary action is facilitated through university/system human resources.
Reason for the Policy
The University of Illinois System (System) supports and encourages programs to acknowledge and formally recognize employee contributions, exemplary performance, and continuous service to the System.
Applicability of the Policy
This policy outlines the guidelines and procedures for providing cash employee recognition awards to faculty and staff outside of the normal employee appointment process.
For cash equivalent awards, such as gift certificates and gift cards used for general merchandise, see 8 Allowability of Gifts, Prizes, and Awards to Individuals.
Eligibility
To be eligible for employee recognition awards:
- The recipient must be either an active System employee or System retiree on the date of the award ceremony.
- The recipient must have met the defined criteria of the award.
Employees are not limited in the number of awards they may receive per year unless otherwise dictated by specific recognition award programs.
Approvals
All monetary employee recognition awards require approval and must be based on specific criteria defined in a documented awards and recognition program. Many recognition awards require additional approvals beyond the department level.
Payments
Monetary employee recognition awards are processed through University Payroll & Benefits (UPB), are always employment related, taxable as wages, not subject to SURS, and deposited directly into the awardee’s bank account according to the weekly adjustment calculation schedule. Paper checks are not issued for employee recognition award payments. Units are responsible for retaining all documentation related to individual employee recognition award payments, including an explanation of the performance or specific achievement recognized and the required approvals.
Appropriate Funding Sources
The source of funding charged for awards must be appropriate for the employee so it does not create any questionable or disallowed charges.
Appropriate funding sources include:
- State
- Institutional
- Self-supporting, when related to the generation of the fund’s revenue;
- Gift and/or endowment income, when in compliance with the applicable donor intent restrictions
- Service plan funds
Use of sponsored funds for awards must have prior approval by the Office of Grants & Contracts – Post Award (GCO) and the sponsor. Because grants are restricted to specific purposes, approval from GCO is required for any awards charged to a restricted fund. However, grants are not generally considered an appropriate funding source for these types of award payments.
Tax Treatment of Employee Recognition Award Payments
All cash awards paid to System employees and/or retirees are subject to the applicable tax withholdings. Deductions for mandatory taxes will be taken from the award payment. Units may increase or gross-up (gross up calculator) the award total to compensate for the taxes that will be deducted from the employee’s award payment. An employee recognition award presented to a foreign national employee may be taxed at the highest possible rate until after a tax status review appointment has been completed. See Payments to Foreign National Employees for more information.
All units are responsible for understanding the potential tax liabilities associated with cash equivalent or non-monetary awards and following the appropriate procedures and policy. See 8 Determine the Allowability of Gifts, Prizes, and Awards to Individuals and 18.5 Fringe Benefits.
Procedure
To process a monetary employee recognition award follow the procedures below.
- Department Originator initiates an Award transaction in the Adjustment Notification Application (ANA).
- Indicate if Gross-up is needed
- Identify the recognition award title and the ceremony date.
- If a sponsored project or grant fund is involved, Contact the Office of Grants and Contracts – Post Award (GCO) for approval.
- Submit to the Department Approver.
- The department will receive confirmation that the ANA transaction has been routed to University Payroll & Benefits (UPB). The award payment will be processed according to the weekly payroll adjustment calc schedule and deposited directly into the employee’s bank account on file with UPB. ANA employee recognition award transactions approved to UPB by noon on Tuesday will be paid that Friday.
- The following approvals are required for employee recognition award payments:
The University of Illinois System:
- If any part of the award will be paid on a grant fund, Office of Grants and Contracts – Post Award (GCO) approval is required. Departments are responsible for contacting GCO for approval.
Specific university approvals:
- University of Illinois at Springfield – Chancellor approval is required for all award amounts.
- University of Illinois at Chicago – Unit head approval is required for awards less than $400. Awards of $400 or more also require Chancellor or Designee approval.
- University of Illinois at Urbana-Champaign – Unit head approval is required for awards less than $400. Awards of $400 or more also require Chancellor or Designee approval.
- University of Illinois System Offices – Unit head approval is required for awards less than $400. Awards of $400 or more also require approval by Employee Relations and Human Resources and Chief Financial Officer or Designee.
Note: For appropriate situations such as employee recognition award ceremonies with 10 or more recipients, payment requests may be submitted on the Award Payment Template.
Forms Used in this Procedure
Adjustment Notification Application (ANA)
Award Payment Template
Related Policies and Procedures
8 Allowability of Gifts, Prizes, and Awards to Individuals
18.5 Fringe Benefits
18.15 Assignment of Income
Additional Resources
Pre-approved Employee Recognition Awards List
Taxation on Award Payment
Make Employee Award Payment
Gross Up Calculator
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