1. Should the bonuses be charged the same as the salary in relation to direct and indirect? If an employees salary for the year is 50% direct and 50% production pool, should the annual bonus be charged 50% direct and 50% production pool in the contractors accounting system?
2. If bonuses are based on company performance factors, should they be charged to the G&A pool? If the bonus is based on an individual performance factor, should it be charged as the salary is charged? If the bonus is based on a combination of the company and individual performance factors, how should the bonus be charged?
FAR 31.201-4 provides the framework for allocating costs. The primary consideration is "...the basis of relative benefits received or other equitable relationship." Any annual bonus needs to be tied to the benefits the government receives from the work performed by the employee earning the bonus. If the bonus is reward for work done specifically on the government contract, it would be charged directly if the salary was charged directly. If the bonus cannot be tied directly and exclusively to work done on the government contract, it should charged as an indirect cost if the salary was charged indirectly. The same approach applies to the issue of whether the bonuses are based on company performance factors or individual performance factors. A company performance factor typically cannot be tied directly to benefits the government receives from an employee's work on a specific government contract, so it would be charged to the G&A pool.
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