Signing and Retention Bonuses

Allowable or Unallowable: Allowable

Source: FAR

Signing and Retention Bonuses

Allowable (to the extent they are reasonable)

Proposed Rule, December 2000

DATE: December 28, 2000

SUBJECT: Federal Acquisition Regulation (FAR); Signing and Retention of High-Technology Workers

SOURCE: Federal Register, December 28, 2000, Vol. 65, No. 250, page 82875

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

SYNOPSIS: It is proposed that FAR 31.205-34, Recruitment Costs, be amended to explicitly make allowable signing and retention bonuses that contractors often must offer in order to recruit and retain workers that have critical technical skills.

DATES: Comments should be submitted on or before February 26, 2001.

SUPPLEMENTAL INFORMATION: Because of the tight labor market, companies doing business with the government often must provide recruitment and retention bonuses to compete with predominantly non-government firms to attract personnel with critical technical skills. This practice is similar to the practice in the government of permitting signing bonuses for difficult-to-fill positions and retention allowances for essential government employees.

The proposed rule would revise FAR 31.205-34, Recruitment Costs, to explicitly allow "signing bonuses needed to recruit employees with critical skills (such as scientists and engineers in fields like software and systems integration), if comparable to the signing bonuses being offered by firms engaged in predominantly non-government work to attract similar job skills; and periodic retention bonuses needed to retain employees with critical skills (such as scientists and engineers in fields like software and systems integration), if comparable to the periodic retention bonuses being paid by firms engaged in predominantly non-government work to retain similar job skills."

The Federal Acquisition Regulation Council withdrew its proposed rule that would have explicitly made allowable signing and retention bonuses that defense contractors provide primarily high-tech workers. The December 2000 proposed rule was intended to help contractors attract and keep workers with critical skills. Many commentators expressed concern the proposed rule would be more restrictive than the current FAR resulting in decreased use of bonuses. After reviewing the comments, the FAR Council concluded the proposed rule was unnecessary since recruitment and retention bonuses are already allowable costs on government contracts if reasonable and allocable to them.