D.C. Mun. Regs. r. 27-3340
Compensation for employee services shall include all remuneration paid or accrued, in any form and whether paid immediately or deferred, for services rendered by employees to the contractor during the period of contract performance.
Compensation for employee services shall be allowable when the work is performed by the employee in the current year and does not represent a retroactive adjustment of a prior year's salaries or wages.
The total compensation for employee services shall be reasonable for the work performed. Specific restrictions on individual compensation elements shall be observed where they are prescribed in the contract or advance cost agreement.
Increases in costs for compensation for employee services shall not be allowable when the contractor introduces new or major revisions to existing compensation plans, unless the contractor does the following before the changes are implemented:
Costs that are not allowable under other sections of this chapter shall not be allowable solely on the basis that they constitute compensation for employee services.
Compensation for employee services shall be considered reasonable to the extent that the total amount paid or accrued is commensurate with compensation paid under the contractor's established policy, and the amount conforms generally to compensation paid by other firms of the same size, in the same industry, or in the same geographic area for similar services.
The contracting officer shall determine whether compensation of the following persons, and their spouses or children, is reasonable for the services performed or is a distribution of profits;
Bonuses and incentive compensation shall be allowable to the extent that the overall compensation is determined to be reasonable, and the costs are paid or accrued pursuant to an agreement entered into in good faith between the contractor and the employee before the services are rendered or pursuant to an established, consistently applied plan followed by the contractor.
The contracting officer shall consider severance pay allowable where it is required by law, an employer-employee agreement, established policy that constitutes an obligation of the contractor, or circumstances of the particular employment.
The contracting officer shall allow pension costs to the extent that the costs are reasonable and meet the following criteria:
The contracting officer shall allow the costs of fringe benefits to the extent that they are reasonable and required by law, by an employer-employee agreement, or as an established, consistently applied policy of the contractor.
Legitimate costs incurred on activities designed to improve working conditions, employee morale, and employee performance shall be allowable. If a net profit is generated by these services, it shall be treated as a credit as provided in § 3310 of this chapter.
D.C. Mun. Regs. r. 27-3340