This checklist provides the requirements of an employee compensation system. This checklist can be used by program directors and human resource managers for ensuring that employees receive the appropriate compensation.

The Department of Health and Human Services (HHS) appropriations bill contains a provision (Section 205) that requires that "none of the funds appropriated in this title for Head Start shall be used to pay the compensation of an individual, either as a direct cost or any proration as an indirect cost, at a rate in excess of Executive Level II."

Severance pay is allowable and should be determined according to established organizational policies applied without regard to the source of funds. It should be reasonable and should take into consideration the practice of similar types of organizations. Grantees will find this information useful when providing severance pay to their employees.