Harbaugh made the same base salary during his four seasons with the San Francisco 49ers. At Michigan, he will receive 10 percent increases after years 3 and 5, plus incentive payments related to Big Ten championships, bowl appearances, individual coaching awards and the team's academic performance.
Winning the national championship would earn Harbaugh $500,000. A Big Ten Championship Game berth would earn Harbaugh $125,000, and a win would earn him $250,000. Bowl incentives are $200,000 for playing in a game selected by the College Football Playoff Selection Committee and $300,000 for playing in the four-team playoff.
National Coach of the Year honors would earn Harbaugh $75,000, and a Big Ten Coach of the Year award would earn him $50,000. Harbaugh can also earn up to $150,000 per year if the football team's Academic Progress Rate (APR) reaches 960 or higher.
Additionally, Harbaugh received a $2 million signing bonus, and as part of a deferred compensation agreement, Michigan's athletic department will review the "progress" of the team after the 2015 season and determine an appropriate arrangement.
Previous reports suggested Michigan offered Harbaugh a deal that would possibly pay him up to $8 million a year.
According to writer John Bacon, Harbaugh told interim athletic director Jim Hackett he did not want to be the highest paid coach in the nation, but he was more concerned with salaries for whoever he hires as his assistants.
After he was introduced at a press conference in Ann Arbor, Harbaugh is expected to attend the Wolverines' men's basketball game on Tuesday night, for which students are planning a "Khaki Out."
Michigan hired Harbaugh to replace Brady Hoke, who was fired on Dec. 3 after four seasons at the school.
Harbaugh, 51, and the 49ers mutually agreed to part ways on Sunday. Harbaugh spent four seasons with San Francisco, leading the team to three straight NFC Championship game appearances before stumbling to 8-8 this season.
The Wolverines went 5-7 this season under Hoke, missing a bowl game for the first time since 2009.
- Molly Geary, Scooby Axson and Mike Fiammetta