Chapter 8, Section 7: Alternative Personnel Practices
Alternative personnel systems fall into several categories. Some agencies and quasi-corporate agencies have been outside the structure of Title 5 of the U.S. Code, the body of law generally governing federal employment programs, for many years. The demonstration project authority has been used for decades to test new systems in specific settings; several of them have become permanent.
Alternative personnel systems fall into several categories. Some agencies and quasi-corporate agencies have been outside the structure of Title 5 of the U.S. Code, the body of law generally governing federal employment programs, for many years. The demonstration project authority has been used for decades to test new systems in specific settings; several of them have become permanent.
In addition, many agencies, or parts of them, have received specific personnel authorities on grounds that they have special needs that standard policies do not meet. Affected policies commonly include hiring, position classification, compensation, performance evaluation and pay-for-performance, among others. However, retirement, insurance and most other benefits remain unchanged, as do protections such as equal employment opportunity laws, veterans' preference, the merit principles and prohibited personnel practices. Two initial examples involved the Federal Aviation Administration in 1996 and the Internal Revenue Service in 1998. Similar flexibilities were granted in the 2001 law establishing the Transportation Security Administration and in the 2002 law establishing the Department of Homeland Security. The Defense Department received similar authorities in 2003, and the Securities and Exchange Commission received some exemptions in 2002 and others in 2003. NASA and the Government Accountability Office followed suit in 2004.
In some cases, authorities later were either scaled back or repealed, however, as described below.
In addition to such agency-specific exceptions are the numerous flexibilities that have grown up over the years to give agencies more discretion in hiring, work scheduling, compensation, job classification, performance management, dispute resolution and in other aspects of employment. In addition to the information below, see www.opm.gov/omsoe/hr-flex and the pertinent sections elsewhere in this Federal Employees Almanac.
Government-Wide Personnel Flexibilities
Largely in reaction to complaints that government-wide personnel rules created recruiting and retention problems and did not always mesh well with agency missions, numerous special authorities have been authorized in recent years giving individual agencies--and even individual hiring officials, managers and supervisors--far greater discretion over personnel decisions on a localized basis than was true in the past. Other authorities have existed for many years and have been widely applied across the government. These flexibilities include:
Hiring--Agencies have the authority to: conduct competitive examining for all positions (except administrative law judges); use commercial recruiting firms and non-profit employment services to recruit for vacancies; waive the 40 hours per week limitation on basic pay to one position and recruit current federal employees for second jobs when "required services cannot be readily obtained otherwise" and "under emergency conditions relating to health, safety, protection of life or property, or national emergency;" allow a detail within a department of its employees for up to 120 days, plus extensions in 120-day increments (intra-agency details in increments of 120 days are allowed when approved by the head of the department); use commercial temporary help services for brief periods (120 days, with extension of additional 120 days) for short-term situations; use excepted service appointments when appropriate; request and use direct-hire authority where there is a severe shortage of candidates or a critical hiring need; use temporary appointments for short-term needs that are not expected to last longer than one year; use Veterans Recruitment Appointments; use term appointments when the need for the employee's services is not permanent; employ experts or consultants for temporary or intermittent employment; and give a noncompetitive temporary appointment of more than 60 days or a term appointment to any veteran retired from active military service with a disability rating of 30 percent or more or rated by the Department of Veterans Affairs within the preceding year as having a compensable service-connected disability of 30 percent or more (see Noncompetitive Appointments in Section 8 of this chapter). Also see Special Recruitment, Hiring, and Placement Programs in Section 1 of this chapter.
Alternative Staffing Options--Agencies have the authority to: use the Pathways Program to attract and recruit exceptional individuals into a variety of occupations; allow eligible veterans to apply for positions announced under merit promotion procedures when the agency is recruiting from outside its own workforce; use the Presidential Management Fellows Program to attract outstanding graduate students (master's and doctoral-level) from a wide variety of academic disciplines; and use other authorities as described in Special Recruitment, Hiring, and Placement Programs in Section 1 of this chapter.
Compensation--Agencies have considerable discretionary authority to provide additional direct compensation in certain circumstances to support their recruitment, relocation, and retention efforts. Some of these are at the agency's sole discretion while others require approval by the Office of Management and Budget and/or the Office of Personnel Management. See Section 5 in Chapter 1.
Lateral and Upward Movement--Agencies may determine the knowledge, skills, and abilities and define the specialized experience required to perform each job. They may use training agreements under which employees may receive accelerated training or on-the-job experience to gain new skills more rapidly. Agencies may design merit promotion plans. Agencies also may establish career ladders that allow noncompetitive promotion based on performance and acquisition of appropriate knowledge and skills. See Section 3 of this chapter.
Student Loan Repayment--Using this authority, agencies may repay federally insured student loans as a recruitment or retention incentive for candidates or current employees. See Section 4 of this chapter.
Hours of Work and Scheduling Flexibilities--Agencies have the discretionary authority to determine the hours of work for their employees to help agencies meet organizational goals and employees balance personal needs. See Section 2 of this chapter.
Telecommuting--Telecommuting allows employees to work at home or at another approved location away from the regular office. See Section 2 of this chapter.
Leave Flexibilities--Agencies may permit employees to use flexibilities in work scheduling (see Section 2 of this chapter) and leave policies (see Chapter 5, Section 2).
Classification--Agencies may: use generic or job family standards for General Schedule positions that use a broader approach to job evaluation by consolidating an entire family of work into one position classification standard, with one set of job family grading criteria; redesign the duties of positions by eliminating a higher level skill so that more candidates may qualify for the position or by adding higher level skills and restructuring the position so that they may offer higher starting salaries; redesign jobs to make them more appealing to candidates by adding desirable duties and eliminating undesirable duties; structure new and vacant positions to allow entry at lower levels from the current workforce; use team leaders rather than supervisors when practical; and plan positions so that there are logical entrance levels and logical career patterns for progression to more skilled and higher-grade positions.
Performance Management--Within a broad framework, the performance management regulations give agencies the freedom to choose the design of their appraisal systems and programs. An agency can establish an overarching performance appraisal system that allows its components to design a variety of appraisal programs, or requires one program for all its employees, or is some variation of these options.
Appraisal programs can use as few as two and as many as five summary rating levels in official ratings of record.
OPM's regulations require that each employee's performance plan include at least one critical element, which, by definition, measures individual performance and establishes individual accountability. However, appraisal programs can also include noncritical and additional performance elements, which can measure individual, group, or organizational performance.
Agencies can take group and organizational performance into account when assigning ratings of record above Unacceptable.
Incentive Awards and Recognition--Agencies have authority to design extensive awards programs that include cash awards, honorary awards, informal recognition awards, and time-off awards. Agencies can give these awards to employees to recognize employee and group performance, and can design incentive programs with awards granted because an individual or a group achieved pre-established goals. OPM award regulations allow: referral bonuses to provide incentives or recognition to employees who bring new talent into the agency; rating-based cash awards of up to 10 percent of salary, or up to 20 percent for exceptional performance; individual or group cash awards in recognition of accomplishments that contribute to the efficiency, economy, or other improvement of government operations of up to $10,000 without external approval, up to $25,000 with OPM approval, and in excess of $25,000 with Presidential approval; quality step increases to employees who have received the highest rating of record available under the applicable performance appraisal program; honorary and informal recognition programs that use recognition items as awards to recognize individual and group performance; and time off from duty without charge to leave or loss of pay as an award to individuals or groups of employees. Also see Chapter 1, Section 4.
Title 5 Exemptions
Certain agencies have been exempted fully or partially from the requirements of Title 5 of the United States Code, which governs federal personnel rules in general. Agencies such as the Tennessee Valley Authority, the Veterans Affairs Department (many of its medical-related positions in the Veterans Health Administration, which account for the majority of the department's workforce), and the Federal Reserve Board have been outside Title 5 for decades. The U.S. Postal Service constitutes the majority of the Title 5-exempt workforce.
Title 5 exemptions apply to certain government corporations, independent establishments, Executive Branch agencies with legislative approval to create alternative personnel systems, and other entities. Some of these are quasi-governmental because they have some type of corporate or other self-funding aspects, while others are in security or other highly specialized fields. Examples include the Central Intelligence Agency, the National Security Agency, "Sallie Mae," the Metropolitan Washington Airport Authority, the Peace Corps, the Office of Federal Housing Enterprise Oversight, the Federal Deposit Insurance Corporation, and non-appropriated fund entities of the Defense Department. Legislative agencies such as the Library of Congress and Government Accountability Office also have Title 5 exemptions.
The scope of Title 5 coverage is a continuum, with totally Title 5-covered agencies on the one end, totally non-Title 5 on the other, and many gradations in between. For example, organizations such as the TVA and USPS have extensive exemptions from Title 5, while other organizations, such as NASA, the Securities and Exchange Commission, the Nuclear Regulatory Commission and the Office of Federal Housing Enterprise Oversight, are only partially exempt. Such agencies may be exempt for classification and compensation purposes, for example, but must adhere to all other provisions of Title 5, such as staffing, performance management, and adverse action rules.
In addition, there are some organizations where only certain classes or portions of employees are exempt from Title 5, while the remainder of the organization is covered. Examples include the Department of State, where only Foreign Service employees are outside of Title 5, and the Smithsonian Institution, where part of the workforce operates under a trust fund, with the remainder covered under the Title 5 system.
While some agencies are formally exempt from certain provisions of Title 5, they may follow them as a matter of policy nevertheless. For example, many exempt agencies are not covered by the merit system principles, but still employ them, or similar merit-based organizational values, such as equity, fairness, and open competition, in their personnel systems. And they typically provide for some form of rating and ranking, classification and compensation systems based on rank or position, and formal due process procedures that mirror Title 5 in many ways. However, this does not mean that they necessarily interpret and implement Title 5's merit system principles or merit processes the same way as covered agencies.
Similarly, all these organizations are covered by the civil rights laws and, in many cases, by collective bargaining agreements similar to those in effect at other agencies. The USPS, for example, is a highly unionized environment in which the unions play a stronger role than they do elsewhere in government.
Demonstration projects, sometimes called "Chapter 47" projects for the chapter of Title 5 authorizing them, may run for no more than five years, with some extension permitted, and may involve no more than 5,000 employees. There may be no more than 10 active demonstration projects at one time. In a Chapter 47 demonstration project, an agency obtains authorization from OPM to be exempt from Title 5's regulations and to propose, develop, test, and evaluate changes in its own human resources management system. Examples of allowable changes in these projects include:
- qualification requirements, recruitment, and appointment to positions;
- classification and compensation;
- assignment, reassignment, or promotions;
- disciplinary actions;
- providing incentives;
- establishing hours of work;
- involving employees and labor organizations in personnel decisions; and
- reducing overall agency staff and grade levels.
No waivers are permitted in areas of employee leave, employee benefits, equal employment opportunity, political activity, merit system principles, or prohibited personnel practices. Consultation and negotiation with affected employees and unions are required.
Many demonstration projects have studied ideas that later worked their way into government-wide policy, such as enhanced recruiting and retention payments, and greater flexibility in hiring. Other ideas studied include the concept of pay banding--replacing traditional grade and step schedules with broad pay bands in which agencies have greater flexibility in setting employee pay rates and rewarding good performance.
Another common theme of demonstration projects is linking performance evaluations more closely to promotions, merit-based pay increases, and downsizing protections. Also common are tests of alternative employee evaluation methods, including specific requirements for achievements related to overall agency goals.
The ongoing projects under Chapter 47 and their key features are:
Department of Defense Acquisition Workforce--Started in 1999, this is the only demonstration project to cover an occupational workforce rather than an organizational entity. Although operating under Chapter 47 rules for other purposes, because of separate legislation the test is not subject to the 5,000-employee limit. The number of affected employees exceeded 11,000 by 2006 and later fell below 3,000 as most who were not in union bargaining units were transferred into the National Security Personnel System (see below). Later, almost all returned as NSPS was phased out.
Key features include: hiring based on scholastic achievement in a field of study specified for an occupation with a positive education requirement, with veterans' preference continuing to apply but the "rule of three" eliminated; occupations with similar characteristics grouped together into three career paths with broad bands; and a contribution-based compensation and appraisal system. Further information is at www.acq.osd.mil/dpap/ops/acqdemo.html.
National Nuclear Security Administration--The NNSA, an arm of the Energy Department, started a demonstration project in 2008 featuring accelerated hiring, more discretion for managers to set higher starting pay for highly qualified hirees, pay banding, faster pay progression for high-performing employees, and pay for performance.
Food Safety and Inspection Service--The Food Safety and Inspection Service, an arm of the Agriculture Department, began a demonstration project in 2009 featuring simplified job classification, pay banding, and pay for performance.
More information on the NNSA and FSIS programs is at www.opm.gov/aps/demoproject.
Defense Department Research Laboratory Projects
Separate from the Chapter 47 demonstration project authority is authority for the Defense Department to conduct similar types of tests at its research laboratories, in a program now called the Science and Technology Reinvention Laboratory project. These authorities mirror in many ways the tests under Chapter 47. However, the DoD laboratory projects are exempt from Chapter 47's time limit and cap on the number of affected employees and can be made permanent without further legislation.
Typical features of these projects include pay banding, a pay-for-performance system, special hiring and appointment authorities, employee development emphasis, and revised reduction-in-force procedures.
Public Law 111-84 expanded the list of participating components, some of which began under the revised personnel authorities in 2011. The current list is: Aviation and Missile Research Development and Engineering Center; Army Research Laboratory; Medical Research and Materiel Command; Engineer Research and Development Command; Communications-Electronics Command; Soldier and Biological Chemical Command; Naval Sea Systems Command Centers; Naval Research Laboratory; Office of Naval Research; Air Force Research Laboratory; Tank and Automotive Research Development and Engineering Center; Naval Air Warfare Center, Weapons Division; Naval Air Warfare Center, Aircraft Division; Space and Naval Warfare Systems Center, Pacific; Space and Naval Warfare Systems Center, Atlantic; and the laboratories within the Army Research, Development and Engineering Command.
Permanent Demonstration Projects
These demonstration projects have been made permanent:
The Navy Demonstration Project--Commonly known as "China Lake," this was the first personnel demonstration project under Chapter 47 and put the term "pay banding" in the federal personnel vocabulary. The project draws its commonly used name from the location of one of the Navy facilities where it was tested, the Naval Air Warfare Center, Weapons Division at China Lake, Calif. It involves about 3,800 employees, including scientists, engineers, technicians, administrative, technical specialists and clerical staff there and at the Naval Command, Control and Ocean Surveillance Center in San Diego.
Key features include: a pay banding system that employs five career paths or occupational groupings; a rank-in-person system that allows employees moving from one position to another in the same pay band to retain their rank or pay; a performance-based compensation system that allows employees who exceed performance expectations to get incentive pay increases substantially exceeding government-wide pay increases, while those who fully meet expectations get at least the government-wide increases; performance evaluation procedures that call for employees to get an annual performance plan, containing specific details about what is expected during the performance year; and RIF retention procedures that base employee rankings within each competitive level primarily on performance, and allows for retention of outstanding performers at all levels, with secondary factors consisting of such elements as tenure, veterans' preference, and length of service.
National Institute of Standards and Technology--This authority involves about 2,700 employees, including scientists, engineers, technicians, clerks, and administrative staff at Gaithersburg, Md., and Boulder, Colo.
Key features include: pay banding; pay for performance for all white-collar employees; supervisory pay differentials; recruitment and retention bonuses; expanded hiring authority and flexibility in setting starting salaries; expanded hiring authorities for professional and support occupations; agency-based hiring for the administrative and technical occupations; and flexible probationary periods.
Department of Agriculture--This program involves certain sites of the Forest Service and Agricultural Research Service testing a simplification of the hiring system for both white- and blue-collar employees.
Key features include: decentralized determination of shortage categories; streamlined examining process using quality groupings in place of numerical ratings and "rule of three;" recruitment incentives, including bonuses and relocation expenses; and extended probationary periods for research scientists.
Department of Commerce--This program involves about 7,400 employees of several Commerce sub-agencies, primarily the National Oceanic and Atmospheric Administration. It builds on certain elements of the former demonstration project at Commerce's National Institute of Standards and Technology (see above).
Key features include: pay-for-performance in a pay banding framework, supervisory performance pay and pay differentials, extended probationary periods for research scientists, delegated examining authority, supplemental hiring tools such as flexible entry salaries, more flexible promotion pay increases, and a two-level rating system (eligible or unsatisfactory).
Department of Defense
P.L. 108-136 of 2003, which added a new Chapter 99 to Title 5, U.S. Code, allowed the Defense Department to make numerous personnel policy changes under a new National Security Personnel System. However, DoD was required to follow certain government-wide policies including benefits, merit principles, veterans' preference, equal employment opportunity, equal pay for equal work, rights to form or join unions and to collectively bargain, and protection against reprisal for whistleblowing and other prohibited personnel practices.
DoD in 2003 and 2004 issued guidance carrying out authorities it gained under that law to pay voluntary separation incentive payments to up to 25,000 employees per year for downsizing or restructuring (see Chapter 9, Section 3), to offer early retirements without the need for prior Office of Personnel Management approval (see Chapter 3, Section 5) and to rehire annuitants in certain circumstances without an offset between their annuities and their salaries (see Chapter 4, Section 4).
In late 2005, DoD published regulations at 5 CFR 9901 to carry out other authorities it received under the law. It announced a phase-in schedule in which new labor/management provisions were to be put in place immediately department-wide, with other changes--including classification, pay administration, performance management, staffing, workforce shaping, adverse actions, and appeals--phased in for employees depending on which group, or "spiral," they were in.
The labor relations portion of the rules sought to: expand the topics excluded from bargaining; allow management to take certain actions without advance notice to labor organizations and without pre-implementation bargaining; allow management to void provisions of existing contracts deemed in conflict with NSPS; and create an internal body to replace the Federal Labor Relations Authority's role in reviewing labor/management disputes. The separate disciplinary procedures for misconduct and poor performance would have been combined into one procedure, the notice and response periods for affected employees would have been shortened, and the standards for mitigating a penalty on outside review would have been raised. In addition, the rules sought to place more emphasis on performance for retention in a reduction in force and to give management greater leeway in how to structure RIFs.
However, in early 2006 a federal court in a union-filed lawsuit enjoined the disciplinary, appeal and labor relations provisions, although it did not bar other parts of the rules. In response, the Pentagon reduced the number of employees affected in the first phases and included only employees not represented by unions. It then began implementing job classification, evaluation, pay, promotion and certain other policies as described below, affecting some 110,000 employees in Spiral 1, in three phases over about 12 months.
In 2007, an appeals court lifted the injunction. DoD then began Spiral 2, affecting about 75,000 employees, all of them also not union-represented, over about six months. However, the department did not implement the adverse action, appeals and labor relations portions pending possible further legal or legislative action.
The unions in early 2008 dropped the lawsuit after enactment of P.L. 110-181, which scaled back the program by:
- repealing the labor relations, disciplinary and RIF authorities and returning DoD to government-wide law in those areas;
- restricting the national-level bargaining and hiring flexibilities allowable;
- barring wage grade employees from coming under NSPS; and
- requiring that employees under NSPS performing above an unacceptable level get annual raises of at least 60 percent of the increase for similarly situated General Schedule employees, as well as locality-based comparability payments in the same manner and to the same extent as employees eligible for locality pay under the General Schedule.
Later in 2008, DoD revised the NSPS rules to comply with that law and to make certain procedural changes and meanwhile shifted additional employees into the system as Spiral 3. By early 2009 when the Obama administration took office, the number of covered employees exceeded 220,000. However, the administration halted any further conversions pending a review of NSPS by the Defense Business Board. That board later recommended a thorough overhaul to address both technical issues and a lack of confidence in the system.
In response, Congress in October 2009 enacted P.L. 111-84, which ordered that NSPS be abolished by the end of calendar year 2011. It directed that employees under NSPS be moved in the intervening time into pay systems that had applied to their positions before coming under NSPS or that would have applied to their positions had NSPS never been created--mostly the General Schedule. The law further barred carving out money from the base raise to be used for performance raises or bonuses in the interim and guaranteed that employees would not suffer any loss of pay due to the transition.
DoD began moving employees out of NSPS in the spring of 2010, and by year's end, the large majority had transitioned out. The transition continued through 2011. Positions covered by NSPS continued under its policies until they were moved out.
Employees transitioned out were placed in grades and steps according to standard job classification policies. Where an NSPS salary fell below the minimum rate of the grade, the employee was placed at the minimum rate; where it fell between two steps, the employee was placed at the higher step; and where it fell above the maximum for the grade, the employee was placed on retained pay.
Those on retained pay are eligible for annual raises of half the local general increase until the underlying rate catches up. Pay retention ends in situations that include a break in service, declining a reasonable offer of a position in which the rate of basic pay would be equal to or greater than the retained rate, or a move to a position where pay retention does not apply. In such situations, the employee is assigned the pay rate of the top step of the grade. Pay retention also ends on a promotion to a position with an equal or higher pay rate or on a reduction in grade for disciplinary reasons.
During pay retention, any recruitment or relocation incentives paid biweekly continue until the end of the designated term, and retention incentives are based on the step 10 level of the grade.
Under certain circumstances, an employee whose salary is at or near the Executive Level IV rate may be eligible to retain pay at that rate plus 5 percent.
P.L. 111-84 further ordered DoD, in conjunction with OPM, to issue new department-wide regulations providing for:
- fair, credible and transparent systems for appraising performance and for linking bonuses and other performance-based actions to those appraisals;
- a process for ensuring ongoing performance feedback and dialogue among supervisors, managers and employees throughout the appraisal period; and
- development of performance assistance plans to give employees formal training, counseling, mentoring and other assistance.
The law also: instructed DoD to issue revised competitive service hiring procedures; authorized a new fund to provide incentive payments for employees based on team or individual performance; and invited DoD to request additional flexibilities, subject to certain restrictions and to congressional approval. The department worked on those issues in 2010-2011.
The information below describes elements of NSPS that applied to certain employees as described above. Further information on NSPS is at www.cpms.osd.mil/nsps.
Classification--NSPS featured a pay banding system of four career groups, with several pay schedules within each, and one to four pay bands under each pay schedule.
Evaluation--Employees were assigned job objectives identifying major individual, team, and organizational responsibilities or contributions and the related outcomes and accomplishments expected. Procedures were required for ongoing feedback and communication between the supervisor and the employee, including a formal interim review midway through the rating cycle and an employee self-assessment. Ratings were based on a five-level system and were subject to challenge by the employee.
Pay--Pay was set within the range for each pay band and each pay schedule. Employees could receive a pay increase through local market supplements that replaced locality pay and special rate pay, general adjustments to the rate range, and for promotion, reassignment, and performance. Those rated at level 3 or higher received performance-based increases paid as a base salary increase, a bonus, or a combination. Available funds were divided into shares, with those rated at higher levels receiving more shares. Employees rated at level 1 or 2 received no performance-based increases, and those rated at level 1 further received no general increase. Money for the performance pay pool came from funds that under the General Schedule would have been spent on within-grade increases, quality step increases, and promotions.
Department of Homeland Security
The 2002 enabling legislation for the Department of Homeland Security (DHS), P.L. 107-296, required that the department operate a "flexible" and "contemporary" personnel system to include alternative practices in areas such as pay setting, performance evaluation, hiring, job classification, and discipline. However, basic employee protections in areas such as merit principles, veterans' preference, due process and anti-discrimination law remained unchanged. Certain DHS employees, most numerously in the Transportation Security Administration, were excluded.
In early 2005, DHS issued final rules at 5 CFR 9701 to carry out a system it called MaxHR. However, a union-sponsored lawsuit resulted in an injunction blocking many of the labor/management and adverse action and appeal rights provisions. DHS essentially put implementation of the program on hold pending an appeal because those provisions were intertwined with the provisions not affected by the court order. In 2006, an appellate court generally upheld the lower court's action, and DHS decided not to appeal to the U.S. Supreme Court.
The department and the unions then started discussions on implementing the provisions that were not enjoined, and DHS converted certain non-union supervisory and managerial employees to a new performance evaluation system. Amid continued union opposition to MaxHR, DHS dropped that name in 2007 and folded the initiative into a broader program called the Human Capital Operational Plan.
Meanwhile, Congress imposed a series of funding and policy restrictions that effectively tied the department's hands. That culminated in a law enacted in 2008, P.L. 110-325, completely barring the department from spending money to carry out an alternative personnel system, although like prior restrictive laws it did not repeal the authorities.
In the wake of that funding cutoff, DHS abandoned the effort and returned employees covered by the revised evaluation system to the prior policies. The action did not affect the separate personnel system in the Transportation Security Administration, a component of DHS that received alternative personnel authority in a separate law that predated the creation of DHS (see below).
Other Major Alternative Personnel Authorities
Internal Revenue Service--Title I, Subtitle C of the IRS Restructuring Act of 1998, P.L. 105-206, created an alternative personnel system at the agency whose features include: critical pay to attract senior managers; streamlined authority to conduct demonstration projects of alternative personnel systems; rewards to senior executives for meeting IRS goals and objectives; requirements to terminate employees for certain specified types of misconduct; a new performance appraisal system to set retention standards for employees that could be used to deny pay increases, promotions, transfers, reassignments or other actions to resolve performance problems; freer use of relocation, recruitment and retention payments; an end to the use of enforcement statistics in employee evaluations; and a training program that emphasizes customer service.
Also authorized was a new awards program that provides incentives and recognition for individual achievements and group or organizational accomplishments. The IRS is required to operate these new personnel flexibilities "consistent with" merit systems principles.
Key features of the personnel reforms include:
- Revised performance standards to permit evaluation of each employee's performance on the basis of the individual and organizational performance requirements, taking into account individual contributions toward the attainment of any goals or objectives.
- Authority to conduct demonstration projects to: improve personnel management; provide increased individual accountability; eliminate obstacles to the removal of or imposing any disciplinary action with respect to poor performers, subject to the requirements of due process; expedite appeals from adverse actions or performance-based actions; and promote pay based on performance. Such projects will not be subject to the OPM approval processes generally applicable.
- Mandatory firing of employees for offenses including: willful understatement of tax liability, willful failure to file returns on time, making false statements under oath, falsifying or destroying documents to conceal mistakes, and using tax laws to harass or retaliate against taxpayers or for personal gain.
- Authority to establish pay banding to replace the General Schedule structure and give greater flexibility in setting salaries. However, in large part due to union opposition, the IRS has applied this provision only to managers. It has created three managerial pay bands: senior manager (former GS-14 and -15 managers who report directly to an executive or who manage one or more subordinate managers); department manager (former GS-11 through -13 second-level managers in accounts management, submission processing and compliance); and frontline manager (former GS-5 through -15 managers not falling into either of the other categories). All managers are eligible to receive a performance-based salary increase commensurate with their annual ratings. The performance-based increase replaces the GS within-grade step increase, quality step increase, and annual across-the-board pay adjustment.
Federal Aviation Administration--Section 347 of P.L. 104-50 freed the FAA from many standard government procedures, including many federal personnel rules to provide more flexibility in hiring, training, compensating, and deploying personnel. Key elements of the FAA system include:
- A centralized applicant pool system that provides automatic consideration for applicants and the opportunity for managers to hire without announcing a vacancy, on-the-spot hires for special program needs and hard-to-fill positions, elimination of time-in-grade requirements for promotions, noncompetitive conversion from temporary to permanent status if competition is held initially for the temporary position, standardized position descriptions, and reduction in the number of hiring authorities to three (permanent, temporary with time limit, and temporary without time limit).
- Decentralized and deregulated training funding and decision making. Each organizational "line of business" identifies its needs and develops a training plan. Line of business units have more flexibility to make decisions about employee training, including support for employees pursuing degree programs that address the organization's mission.
- A personnel appeals process called Guaranteed Fair Treatment consisting of a three-member panel made up of one advocate chosen by each side and a neutral arbitrator. FAA employees have the choice of using that system or pursuing traditional Merit Systems Protection Board appeal rights. (Note: A 2009 decision from the U.S. Court of Appeals for the Federal Circuit, Gonzalez v. Department of Transportation, No. 2007-3309, held that MSPB's authority in FAA cases does not include awarding back pay.)
- Pay bargaining with air traffic controllers.
Government Accountability Office--GAO is a Legislative Branch agency that generally follows Executive Branch personnel policies. Its positions are placed into bands based on job content and rates are linked to the market. The annual amount of funding available for performance-based compensation increases is calculated as a percentage of the salaries within each pay band. GAO uses a five-level performance rating system and does not use pay pools or review boards to validate ratings across different units, nor does it require ratings consistency across units.
GAO employees who perform at a "meets expectations" level or higher generally are guaranteed a permanent pay adjustment at least equal to the annual adjustment for General Schedule employees for the local pay area. The exceptions are members of the Senior Executive Service, wage system employees and employees in entry-level development programs. Those in the latter group receive performance reviews and associated permanent pay raises more than once a year that generally are substantially greater than what the floor guarantee would provide. The guaranteed floor provision, enacted in 2008 by P.L. 110-323, overrode a prior policy of requiring that employees in certain pay bands had to exceed certain averages in order to get performance-based pay.
That law also made GAO employees subject to a pay cap of Level III of the Executive Schedule, a cap higher than that applying to most other federal employees, and made whole certain employees who had been denied raises under prior policies. GAO also has permanent authority to offer early retirements and buyouts for workforce shaping.
Transportation Security Administration--The Transportation Security Administration was exempted from many standard personnel policies when it was established as part of the Transportation Department by P.L. 107-71. TSA kept those exemptions when it was later moved into the Department of Homeland Security.
Most TSA employees are passenger or baggage screeners working at airports. TSA has broad authority to employ, appoint, discipline, terminate, and fix their compensation, terms, and conditions of employment. Prior to 2011, screeners and employees in certain associated jobs could not bargain collectively under agency policy, although they could join a union and enjoy some benefits of union membership, including the right to have a union representative in some personnel proceedings.
An agency policy decision of February 4, 2011, allowed for bargaining for screeners and related employees, although more limited than what typically applies in unionized federal workplaces. The directive allowed bargaining only at the national level and only on certain issues, including performance management, awards and recognition, attendance management, and shift bids. It excluded subjects including any form of compensation, proficiency testing, job qualifications, and disciplinary standards. Later that year, a national bargaining unit was certified, with negotiations toward an initial contract carrying into 2012.
For special whistleblower protection policies applying at TSA, see Whistleblowing in Chapter 10, Section 3.
TSA uses a pay banding system coupled with a five-level rating system called the Performance and Accountability Standards System (PASS), with salary increases and/or bonuses going to the top three levels and small bonuses going to the fourth level (before 2008 there were four levels with increases going to the top two). PASS applies to transportation security officers (TSOs), lead TSOs, supervisory TSOs, some master and expert TSOs, and security managers--the large majority of the agency's front-line workforce. Ratings components typically include, as appropriate to the job, technical proficiency, readiness for duty, training and development, customer service, decisiveness, oral communications, conflict management, teambuilding, management proficiency and supervisor accountability.
Employees typically are rated twice a year and new hires have at least six months to complete PASS requirements after receiving initial certification. Employees who take on extra assignments can have their score increased. Ratings are not subject to outside review.
Intelligence Community--In 2008, the Office of the Director of National Intelligence created the National Intelligence Civilian Compensation Program, which commits agencies to setting the pay of their employees in intelligence-related functions according to a common set of pay and performance management policies. Each agency carries out the program through internal regulations.
The program created a pay banding system for intelligence community employees with three occupational groups: technician and administrative support; professional; and supervisory. Employees are to be evaluated on behaviors such as personal leadership and integrity, collaboration and critical thinking.
Under the policy, intelligence agencies are required to submit pay budget requests to the Office of Management and Budget and Congress that are no less than the amount that would have been budgeted had the affected jobs remained under the General Schedule.
Affected employees receive written performance expectations at the start of an evaluation period and receive a mid-year review. All end-of-cycle appraisals are subject to at least two levels of management review and approval before they are finalized. Ratings quotas or forced distributions are prohibited, and employees may appeal their rating to a management official above and/or outside the rating chain and may have the right to file a grievance in accordance with the agency's regulations.
All employees who receive a performance rating of successful or higher receive the full annual GS pay raise, plus the applicable locality adjustment, and are eligible for performance-based raises or bonuses. Performance payouts are based on factors including the employee's rating and current salary, the ratings distribution in the performance pay pool, and the funds allocated to the pool, subject to possible change by higher-level management under certain criteria.
Defense Civilian Personnel Intelligence System--This Defense Department personnel system involving pay banding and performance-based pay is designed to conform to the policies of the National Intelligence Civilian Compensation Program and is based on a program in the National Geospatial-Intelligence Agency (NGA). DoD in 2008 began phasing in DCPIS in its other intelligence-related subagencies, but Congress suspended the program for calendar year 2010 outside NGA due to concerns about its performance management elements. An outside study concluded in mid-2010 that the system wasn't inherently unfair but found problems in its implementation. In response, DoD cancelled the pay for performance elements except at NGA and returned other affected employees to their previous pay systems with a guarantee of no loss in pay. Other elements of DCPIS continue, including the occupational structure, a common performance evaluation system and the use of bonuses, awards and within-grade increases to reward good performers.
Financial Regulatory Agencies--The Securities and Exchange Commission, Federal Housing Finance Agency, and Federal Deposit Insurance Corporation have independent authority for performance-based pay systems. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) granted other federal financial regulatory agencies the flexibility to establish their own compensation systems. FIRREA agencies also are required to consult with one another for the purpose of keeping their compensation systems in line with others. The FIRREA agencies in general link employee performance objectives to organizational goals and the overall strategic direction of their organizations. These agencies include the Treasury Department's Office of Thrift Supervision and its Office of the Comptroller of the Currency, and the National Credit Union Administration, Farm Credit Administration, Commodity Futures Trading Commission and Federal Housing Finance Agency, among others.
A performance-based organization (PBO) is a government program, office, or other discrete management unit with strong incentives to manage for results. The organization commits to specific measurable goals with targets for improved performance. In exchange, the PBO is allowed more flexibility to manage its personnel, procurement, and other services.
The goal is to set forth clear measures of performance, hold the head of the organization clearly accountable for achieving results, and grant the head of the organization authority to deviate from government-wide rules if needed to achieve agreed-upon results. PBOs are characterized by:
- separating service operations from their policy components and placing them in separate organizations reporting to the agency or department head;
- negotiating a three- to five-year framework document between the PBO and the departmental secretary to set out the explicit goals, measures, relationships, flexibilities, and limitations for the organization; and,
- creating the position of chief operating officer to head the service operation functions, where the chief operating officer is appointed or hired on contract through a competitive search for a fixed term, with a clear agreement on services to be delivered and productivity goals to be achieved.
The current PBOs are: Student Financial Assistance at the Education Department under P.L. 105-244, the United States Patent and Trademark Office under P.L. 106-113, and the Air Traffic Organization at FAA under Executive Order 13180 of December 7, 2000.