Acting pay: Overview, definition, and example
What is acting pay?
Acting pay refers to temporary additional compensation given to an employee who takes on the duties of a higher-ranking position for a limited period. This occurs when a manager or executive is absent, resigns, or when a role is temporarily vacant. Acting pay ensures that the employee covering the role is fairly compensated for the extra responsibilities.
For example, if a department head takes a leave of absence, a senior employee may step in to handle leadership duties. If the company offers acting pay, that employee will receive a higher salary for the time they perform the additional role.
Why is acting pay important?
Acting pay provides financial recognition for employees who assume greater responsibilities on a temporary basis. Without it, employees might be reluctant to take on extra duties, which could affect business continuity and performance.
For employers, offering acting pay helps retain talent, ensures smooth transitions during leadership changes, and maintains employee morale. Many organizations have formal policies outlining when acting pay applies, how much is provided, and how long it lasts.
Understanding acting pay through an example
Imagine a company’s finance director takes a six-month sabbatical. The company appoints the senior accountant to handle the director’s responsibilities during this period. Under the company’s acting pay policy, the senior accountant receives a temporary salary increase reflecting the higher-level duties. Once the finance director returns, the acting pay ends, and the senior accountant resumes their normal compensation.
In another case, a school principal resigns unexpectedly. The vice principal takes over leadership duties until a replacement is hired. During this transition, the vice principal receives acting pay to compensate for the additional responsibilities.
An example of an acting pay clause
Here’s how an acting pay clause might appear in an employment contract:
“If an Employee is temporarily assigned to perform the duties of a higher-ranking position for a period exceeding [specified duration], the Employee shall receive acting pay equivalent to [percentage or fixed amount] of the salary for the higher-ranking position for the duration of the assignment.”
Conclusion
Acting pay ensures that employees who temporarily step into higher roles receive fair compensation for their increased responsibilities. It helps businesses maintain smooth operations during leadership transitions while recognizing employees’ contributions.
By including a clear acting pay policy in employment contracts or company guidelines, businesses can establish transparency, prevent disputes, and encourage employees to take on temporary leadership roles when needed.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.