(a) The Department of Higher Education may develop and implement a merit increase pay system in accordance with the performance evaluation process under § 21-5-1001 for the employees of all institutions covered by this subchapter.

(b)

(1) Except as provided in subdivision (b)(2) of this section, to be eligible to be evaluated under the merit increase pay system an employee shall have continuous employment with the state in a regular full-time position for twelve (12) months.

(2) A part-time employee in a regular salary position who has had continuous part-time employment with the state for twelve (12) months shall be eligible to be evaluated for a pay increase under the merit increase pay system and to receive the merit pay increase on a pro rata basis.

(c) For the purpose of this subchapter, "merit increase pay system" means a merit-based pay system that incorporates pay and performance evaluation standards according to § 21-5-1001 and establishes criteria for lump-sum payments for employees who meet requisite performance categories.

(d) Merit payments may be awarded to employees who satisfy performance evaluation-based criteria developed by institutions in accordance with rules and policies developed and approved by the Department of Higher Education after review by the Legislative Council.

(e) Effective July 1, 2017:

(1) Employees who receive an overall satisfactory rating under an approved performance evaluation system shall be eligible for a merit increase of up to one and five-tenths percent (1.5%);

(2) Employees who receive an overall above-average rating under an approved performance evaluation system shall be eligible for a merit increase of up to three percent (3%); and

(3) Employees who receive an overall exceeds-standards rating under an approved performance evaluation system shall be eligible for a merit increase of up to four and five-tenths percent (4.5%).

(f)

(1) Employees are eligible for a merit increase to be paid as a lump sum on the employee's merit increase date or as an increase in salary, and the payment shall not be construed as exceeding maximum salary.

(2) The lump-sum payments authorized in this section shall be considered as salary for the purposes of retirement eligibility.

(g) Management or supervisory personnel who fail to complete annual evaluations of employees under their administrative control are not eligible for merit payments.