This attorney drafted employee incentive pay plan template sets forth the terms of an
incentive plan from a company to its employees. This particular template sets forth a
bonus structure, but other structures may include additional or alternative incentives
such as payment of moving expenses, stock options and/or profit sharing, among
others. This template contains other standard language, such as that the participant’s
employment is still at will, that the incentive pay plan is unfunded, and that the incentive
plan is intended to comply with, or otherwise be exempted from, the listed Internal
Revenue Code provisions.
[Instruction: Insert company logo/letterhead here.]
Employee Incentive Pay Plan Template
[Comment: The following contains sample types of incentive pay. Company should revise
the following to reflect its own specific motivations and available types of incentive pay
offerings.]
The _____ [Instruction: Insert company name.] (“Company”) incentive plan for 20__
[Instruction: Insert year.] ("Plan") is designed to reward eligible employees for their efforts
toward the accomplishment of Company’s goals during the Plan Year. For purposes of the Plan,
“Plan Year” means Company’s fiscal year starting _____ through and including _____,
[Instruction: Insert dates.] but, as further described below, eligible employees may receive a
partial mid-year bonus. [Comment: Delete or revise as applicable.]
Eligibility
Eligibility under the Plan does not represent a commitment or guarantee that you will receive any
incentive payment under the Plan. If, for any reason, you are not an active Company employee
meeting all eligibility requirements on the payment date of any applicable incentive payment,
you will not be eligible to receive such incentive payment under the Plan. Furthermore, the
decision to pay any incentive under the Plan remains in the Company’s sole discretion.
Eligible employees are as follows: _____ [Instruction: Insert eligibility requirements.]
(“Eligible Employee”). An Eligible Employee must remain an employee in good standing on the
date that incentives are paid to receive any payment under the Plan.
New Hires and Promotions into Eligible Positions. Eligible Employees hired or promoted into
an eligible position after the effective date of this policy will have any incentive payment
prorated to reflect the length of time employed as an Eligible Employee during the Plan Year.
However, employees hired after _____ will not be eligible for a Mid-Year Bonus, if any is paid
(as defined below), and employees hired after _____ [Instruction: Insert applicable dates.] will
not be eligible for the Plan.
Changes Between Eligible Positions. Eligible Employees who move from one eligible position
to another eligible position with a different incentive structure will have any such incentive
structure prorated based on the length of time employed in each Eligible Position.
Target Bonus Opportunity [Comment: Revise or delete specific incentives listed as
applicable.]
Each eligible position is assigned a target bonus amount (“Target Bonus”), expressed as a
percentage of earned salary for the applicable period. Your supervisor will discuss your Target
Bonus with you.
Plan Administration
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The Company will have sole discretion to determine whether any percentage of Target Bonus
will be paid under the Plan, in amounts ranging from 0% to over 100% of Target Bonus.
Company may amend, suspend or terminate the Plan at any time and in any manner. All
payments under the Plan are discretionary and may be reduced or eliminated in the sole
discretion of the Company.
All determinations, interpretations, rules and decisions of the Company regarding the Plan shall
be conclusive and binding upon all persons claiming to have any interest or right under the Plan.
Bonus Payments
In order to receive any payment under the Plan, an Eligible Employee must remain an active
employee on the date that such incentive is paid. If an Eligible Employee is terminated prior to
payment of any such incentive (whether by you or by Company, regardless of the reason), such
employee will not be eligible to receive any incentives payable under the Plan.
Mid-Year Bonus In the sole discretion of the Company, a “Mid-Year Bonus” of up to 25% of
each Eligible Employee's Target Bonus may be paid during the year based on the Company’s
assessment of such employee’s performance through the date of such payment of such Mid-Year
Bonus.
Year-End Bonus A year-end bonus (with the percentage of Target Bonus determined by the
Company in its sole discretion) may be paid based on the Company’s assessment of its
performance for the Plan Year, less any Mid-Year Bonus previously paid.
If the Company approves payment under this Plan, each Eligible Employee will receive the same
percentage of his or her Target Bonus. However, the foregoing does not limit the Company’s
authority to award discretionary bonuses to individuals outside of the Plan.
Operating Guidelines
No Eligible Employee may rely on any verbal or other information outside of this Plan.
Company reserves the right to amend, discontinue or make significant changes to the Plan at any
time and for any reason, with or without notice. Eligibility for an incentive payment under this
Plan does not guarantee eligibility for any future payments or bonus programs or payment of any
such bonus.
At Will Employment
Nothing in the Plan shall confer upon any employee or other Plan participant any right to
continued employment or service with Company for any specific duration or otherwise restrict in
any way the rights of Company or any employee to terminate an Eligible Employee's
employment at any time, for any reason, with or without cause.
Tax Withholding
Company shall withhold from the payments under the Plan all federal, state and local income or
other taxes required to be withheld therefrom and any other required payroll deductions, and as a
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condition precedent to payment under the Plan, all recipients shall make arrangements
satisfactory to Company for the payment of any personal income or other taxes.
Miscellaneous
This Plan is unfunded. In no event may a participant sell, transfer, anticipate, assign or otherwise
dispose of any right or interest under the Plan or relating hereto. At no time will any such right
or interest under the Plan be subject to the claims of any participant's creditors or liable to
attachment, execution or other legal process.
The validity, construction and effect of the Plan and of any rules, regulations, determinations or
decisions made by the Company relating to the Plan, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined exclusively in
accordance with applicable federal laws and the laws of the State of _____, [Instruction: Insert
state.] without regard to its conflict of laws principles.
To the extent applicable, the Plan and all incentive payments granted hereunder are intended to
comply with, or otherwise be exempt from, Code section 409A. The Plan and all payments
made hereunder granted under the Plan shall be administered, interpreted, and construed in a
manner consistent with Code section 409A to the extent necessary to avoid the imposition of
additional taxes under Code section 409A(a)(1)(B). Should any provision of the Plan, any
payment hereunder, or any other agreement or arrangement contemplated by the Plan be found
not to comply with, or otherwise be exempt from, the provisions of Code section 409A, such
provision shall be modified and given effect (retroactively if necessary), in the sole discretion of
the Company, and without the consent of the holder of the payment, in such manner as the
Company determines to be necessary or appropriate to comply with, or to effectuate an
exemption from, Code section 409A. Notwithstanding anything in the Plan to the contrary, in no
event shall the Company exercise its discretion to accelerate the payment or settlement of an
incentive payment where such payment or settlement constitutes deferred compensation within
the meaning of Code section 409A unless, and solely to the extent that, such accelerated payment
or settlement is permissible under Treasury Regulation section 1.409A-3(j)(4) or any successor
provision.
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