**EXHIBIT 10.3**

 

 

***Spherion Corporation******CorporateExecutivesManagement Variable Pay Plan***

***2006 Variable Pay Plan***

 

***For Plan Year:Fiscal 2006***

 

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***Introduction***

Thefollowing Variable Pay Plan (the “Plan”) is designed to reward Plan EligibleAssociates for achievement of specific goals as well as to provide an incentiveto retain talent and encourage future performance with Spherion.  This Plan has been established to align yourindividual success with that of Spherion.

 

Yourdedication and commitment to the Company is greatly appreciated.  Thank you for your continued support now andin the future.

 

***EffectiveDate/Plan Year***

ThisPlan is in effect for Fiscal Year 2006 (January 2, 2006 through December 31,2006) (the “Plan Year”).  This Plansupersedes any prior plans as of the date it becomes effective**.****ThisPlan may be extended beyond the Plan Year at the sole discretion of Spherion.

 

## ***Eligibility***

Eligibilityto participate in this Plan is within Spherion’s sole discretion, but ingeneral is based on an Associate’s position. For purposes of this Plan, the term Plan Eligible Associate means anAssociate who Spherion determines is eligible to participate in this Plan.

 

Eligibilitybegins on the first day of the accounting month after an Associate beginsemployment as a Plan Eligible Associate and terminates immediately when anAssociate’s employment as a Plan Eligible Associate ends.

 

## ***Change of Positions/Leave ofAbsence/ Other types of Pro-rated Compensation***

Inorder to be eligible for or earn any compensation under this Plan, a PlanEligible Associate must remain employed by Spherion in some capacity throughthe last date of the Variable Pay Period. If the Plan Eligible Associate does not meet this condition, he/she willnot earn any compensation under this Plan. (***See the Variable Pay Period/Payment Section below) *** If a Plan Eligible Associate meets thiscondition, but was actively employed as a Plan Eligible Associate for only apart of the Variable Pay Period, his/her compensation under this Plan will bepro-rated based on the number of weeks he/she was actively employed as a PlanEligible Associate.  Some examplesinclude:

 

1.               New Hires

2.               Leave of Absence - LOA

3.               Change in Work Classification Status(full-time vs. part-time)

4.               Position Changes resulting in Incentive Plan &/orSalary Changes

5.               P&L Roll Up Structure Changes (with noposition change)

 

Fora detailed explanation of the administrative policies on how these and othertypes of Personnel Changes affect the Plan Eligible Associate’s compensation,please refer to the Pro-Ration Guidelines found on Explore under BusinessProcess Map/Associate HR/Incentive Compensation Pro-Ration Guidelines.

 

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***Components***

A Plan Eligible Associate has a Variable PayOpportunity which is determined as a percentage (%) of his/her base salary.

 

The Variable Pay Opportunity is made up ofone component, Company EPS.

 

To the extent permitted by the law, Spherionshall have the right to withhold, deduct, and/or set off any and all amountsfor bad debts (including write-off’s), re-bills, credits, or other adjustmentsfrom the payment calculations.

 

1.               **Company Earnings Per Share (EPS).**   100% of the Variable Pay Opportunity is based on theCompany attaining EPS from continuing operations * (adjusted for stock optionaccounting) for fiscal year 2006.   Inorder for a Plan Eligible Associate to earn any compensation under this EPScomponent, the Company must attain a minimum Threshold EPS of  *  fromcontinuing operations.  No EPS componentwill be earned if 2006 EPS from continuing operations is less than theThreshold.  If the EPS Threshold isreached, the component payout will increase and be precisely interpolatedbetween Goal Levels as reflected in the chart below:

 

**SpherionEPS**

**(100% ofVariable Pay Opportunity)**

 

| **Goal Level**  | ** ** | **EPS from  continuing  operations** | ** ** | **% of EPS Component  Awarded** | ** ** |
|-----------------|------------|--------------------------------------|------------|---------------------------------|------------|
| Achievement     |       |                                 |       | *                               | 200        | % |
| Target          |       |                                 |       | *                               | 100        | % |
| Threshold       |       |                                 |       | *                               | 5.88       | % |
| Below Threshold |       |                                 |       | *                               | 0          | % |

 

TheEPS goal levels are set at the beginning of the year, but are subject to changeat the sole discretion of the Company. Any change to the EPS goal levels will be communicated to the PlanEligible Associates.

 

Payout of this component will be capped at200% of the EPS Component Awarded; provided however, in the event that CompanyEPS exceeds a 200% payout, the Compensation Committee, in its sole discretion,upon recommendation by the CEO may create and distribute a pool of additionalpayout dollars as it deems appropriate.

 

***Please see the example provided at the end of thisPlan.***

 

## ***Variable Pay Period/ Payment***

The“Variable Pay Period” is the Plan Year. Compensation under this Plan is based on annual results and is thereforeearned on an annual basis.  A PlanEligible Associate must be employed by Spherion through the last date of theVariable Pay Period to be eligible for or earn any compensation under thisPlan.  ***(SeeTermination of Employment Section Below) ***Any compensation earned under this Plan will be paidwithin 45 business days after the close of the accounting year.

 

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* Confidential portions omitted and filed separately with theCommission.

 

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## ***Termination of Employment***

Eligibilityto participate in and ability to earn any, or receive any compensation underthis Plan ceases immediately upon termination of employment with Spherionregardless of whether such termination of employment is due to resignation,termination without cause, termination for cause, or otherwise.

 

APlan Eligible Associate, whose employment with Spherion terminates prior to theend of the Variable Pay Period, will not be eligible for or be considered tohave earned compensation under this Plan in whole or in part.

 

Inaddition, any Plan Eligible Associate who resigns his/her employment or who isterminated for cause after the end of the Variable Pay Period but beforeSpherion pays the actual compensation earned under this Plan will not beeligible for or be considered to have earned any compensation under thisPlan.   If a Plan Eligible Associate isterminated by Spherion without cause after the Variable Pay Period but beforeSpherion pays the compensation, the Plan Eligible Associate will be consideredto have earned compensation under this Plan through the end of the Variable PayPeriod.

 

## ***Retention Bonus***

If variable pay that exceeds200% of the Plan Eligible Associate’s opportunity is calculated, this retentionbonus will be distributed along with the regularly scheduled variable paycompensation for Fiscal Year 2007 (within 45 business days after the close ofthe 2007 accounting year).  In order toearn the retention bonus, the Plan Eligible Associate must still be employedwith Spherion on the date the payment is made; provided, that if a PlanEligible Associate is terminated by Spherion without cause during the periodbetween the end of the Variable Pay Period and the date the retention bonus ispaid, the Plan Eligible Associate will still be eligible to receive theretention bonus.

 

## ***Disputes***

*If thereis a dispute related to this Plan, including, but not limited to, a disputeover eligibility or award, it will be resolved by the Compensation Committee orits designee, whose decision shall be final.*

* *

## ***At-Will Employment***

Theonly matter this Plan is intended to address is variable pay compensation.  Nothing in this Plan shall alter or beconstrued as to alter the at-will employment status of any Plan EligibleAssociate.  The Plan Eligible Associate’semployment is at-will and may be terminated by either party at any time, withor without cause.

 

## ***Amendments, Exceptions, orTermination of the Plan***

TheCompensation Committee or its designee will administer this Plan and have thepower to implement, operate, and interpret this Plan and to take such action asit deems equitable and consistent with the purpose of this Plan in particularcircumstances.   No exception ormodification to this Plan will be valid unless it has been approved in writingby the Compensation Committee or its designee.

 

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The Company reserves the right to change,modify, alter, amend, or cancel this Plan at any time, with or without noticeand with or without consideration.

 

## ***Acknowledgement***

Plan Eligible Associate acknowledges thathe/she has reviewed the Plan and will address any of his/her questions to theSpherion Compensation Department.  PlanEligible Associate hereby reaffirms his/her Acknowledgement of the Plan.

 

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## ***EXAMPLE (This example is notintended to imply any actual percentages, payout, or targets under thisVariable Pay Plan.  It is merely forillustrative purposes to show how the Variable Pay Plan components may be calculatedin a hypothetical situation)***

 

***Corporate Executive Management***

 

***2006 Variable Pay Plan Example***

*** ***
| **Assumptions:**                                  | ** ** | ** **     | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|----------------|------------|------------|------------|
| Base Salary (January 1, 2006) |       |           |       | $          | 150,000    |   |
| Variable Pay  Opportunity (% of base)             |       |           |       | 50         | %          |
| Variable Pay  Opportunity ($)                     |       | $150,000 x 50% |       | $          | 75,000     |   |
| Spherion EPS  target                              |       |           |       |       | *          |

 

***YearEnd Results***

 
| **Example #1**            | ** ** | ** **     | ** ** | ** ** | ** ** |
|--------------------------------|------------|----------------|------------|------------|------------|
| **Spherion  EPS**              | ** ** | Target         | ** ** | ** ** | *          |
| **Variable  Pay Calculation:** | ** ** | ** **     | ** ** | ** ** | ** ** |
| **EPS**                        |       | $75,000 x 100% |       | $          | 75,000     |   |
| **Total  Annual Variable Pay** | ** ** |           |       | $          | 75,000     | ** ** |

 

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* Confidential portions omitted and filed separately with theCommission.

 

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EXHIBIT A

 
| **Executive  Name** | ** ** | **Title**                                                | ** ** | **Annual Incentive  Award Target** | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|------------------------------------|------------|
| Roy G. Krause       |       | President and Chief Executive Officer                    |       | 100% of annual base salary         |       |
| William J. Grubbs   |       | Chief Marketing and Corporate Development Officer        |       | 60% of annual base salary          |       |
| William G. Halnon   |       | Senior Vice President and Chief Information  Officer     |       | 60% of annual base salary          |       |
| Lisa G. Iglesias    |       | Senior Vice President, General Counsel and Secretary     |       | 60% of annual base salary          |       |
| Richard A. Lamond   |       | Senior Vice President and Chief Human  Resources Officer |       | 60% of annual base salary          |       |
| Mark W. Smith       |       | Senior Vice President and Chief Financial  Officer       |       | 60% of annual base salary          |       |

 

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