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Alternative Personnel Practices

Governmentwide Personnel Flexibilities

Largely in reaction to complaints that governmentwide personnel rules created recruiting and retention problems and did not always mesh well with agency missions, numerous special authorities have been created 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 and Staffing—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 (called the “dual pay 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; use the Pathways Program; allow eligible veterans to apply for positions announced under merit promotion procedures when the agency is recruiting from outside its own workforce; 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.

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 Chapter 1, Section 5.

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.

Telework—Telework 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. See Section 3 of this chapter.

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. See Chapter 1, Section 4.

Title 5 Exemptions

Certain agencies are fully or partially exempt from the requirements of Title 5 of the United States Code, which governs federal personnel rules in general. Title 5 exemptions mainly apply to certain government corporations, independent establishments, and Executive Branch agencies with legislative approval to create alternative personnel systems. Some of these 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 Defense Advanced Research Projects Agency, the Peace Corps, the Federal Deposit Insurance Corporation, the Federal Reserve Board and non-appropriated fund entities of the Defense Department.

The scope of Title 5 coverage is a continuum, with many gradations. For example, organizations such as the Tennessee Valley Authority and U.S. Postal Service (see Chapter 12) have extensive exemptions, while other organizations, such as NASA, the Securities and Exchange Commission and the Nuclear Regulatory Commission 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. Similarly, all these organizations are covered by the civil rights laws.

In addition, there are some organizations where only certain classes or portions of the workforce are exempt from Title 5, while the remainder of the organization is covered. Examples include the Department of State, where Foreign Service employees are outside of Title 5, most medical positions in the Department of Veterans Affairs, and the Smithsonian Institution, where part of the workforce operates under a trust fund. Legislative agencies such as the Library of Congress and Government Accountability Office also have Title 5 exemptions.

While some agencies are 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.

Demonstration Projects

In a demonstration project, sometimes called a “Chapter 47” project for the chapter of Title 5 authorizing them, 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. Consultations and negotiations with affected employees and unions are required.

Many demonstration projects have studied ideas that later became governmentwide 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. 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.

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.

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 in a program called the Science and Technology Reinvention Laboratory project. These authorities mirror in many ways the tests under Chapter 47. 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.

Authorized components are: Air Force Research Laboratory; Joint Warfare Analysis Center; Army Research Institute for the Behavioral and Social Sciences; Army Research Laboratory; Combat Capabilities Development Command-Armaments Center; Combat Capabilities Development Command-Aviation and Missile Center; Combat Capabilities Development Command-Chemical Biological Center; Combat Capabilities Development Command-Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance Center; Combat Capabilities Development Command-Ground Vehicle Systems Center; Combat Capabilities Development Command-Soldier Center; Engineer Research and Development Center; Medical Research and Materiel Command; Technical Center, US Army Space and Missile Defense Command/Army Forces Strategic Command; Naval Air Systems Command Warfare Centers; Naval Facilities Engineering Command Engineering and Expeditionary Warfare Center; Naval Information Warfare Centers, Atlantic and Pacific; Naval Medical Research Center; Naval Research Laboratory; Naval Sea Systems Command Warfare Centers; Office of Naval Research.

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 primarily involves 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 governmentwide pay increases, while those who fully meet expectations get at least the governmentwide 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 primarily involves 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 using a simplified the hiring system for both white- and blue-collar employees that includes: 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 several Commerce sub-agencies, primarily the National Oceanic and Atmospheric Administration. It builds on certain elements of the 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

The Defense Department’s New Beginnings program was created under P.L. 111-84 of 2009, which repealed the former National Security Personnel System, a pay-for-performance system that had applied to about a third of the department’s workforce for several years. The major feature of New Beginnings is the Performance Management and Appraisal Program, which was phased in over 2016-2018 and now covers a large majority of the department’s employees.

Under DoD Instruction 1400.25, Volume 431 (at, each covered employee must have a written performance plan for each ratings cycle that is to clearly document how performance will be measured. These plans must include performance elements that meet standards for being specific, measurable, achievable, relevant and timely. Supervisors must hold at least three formal performance discussions with an employee during the appraisal cycle: an initial meeting to discuss performance expectations; one regular progress review; and a final performance appraisal discussion to communicate the rating of record. Supervisors are to monitor performance continuously, for example to identify an employee’s need for training or developmental opportunities, and may initiate additional progress reviews. Performance on each element is evaluated on a three-level scale corresponding to Level 5 (outstanding), Level 3 (fully successful) and Level 1 (unacceptable) of a standard five-level system. Performance element ratings are averaged to calculate the rating of record. Employees may choose to provide written input for the supervisor to consider in setting ratings. They further may seek reconsideration through the administrative grievance system or, where applicable, negotiated grievance procedures.

The ratings are to be used in actions including awards, eligibility for regular within-grade increases or quality step increases, reassignment, reduction in grade or removal.

Certain categories of employee are excluded, such as administrative law judges, senior executives, senior level and senior scientific or technical employees, non-appropriated fund employees and temporary employees serving appointments of less than one year. Also excluded are employees in alternative personnel systems including the Defense Civilian Intelligence Personnel System, the acquisition workforce demonstration project and the Science and Technology Reinvention Laboratory project (see above).

Also see

Other Major Alternative Personnel Authorities

Internal Revenue Service—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. Key features 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. Any 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 provided more flexibility in hiring, training, compensating, and deploying personnel at the FAA. Key elements 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, Federal 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. GAO employees are subject to a pay cap of the rate of Level III of the Executive Schedule, a cap higher than that applying to most other federal employees. GAO also has permanent authority to offer early retirements and buyouts for workforce shaping.

Transportation Security Administration—The Transportation Security Administration has broad authority to employ, appoint, discipline, terminate, and set compensation, terms, and conditions of employment for its employees—most of whom are airport passenger or baggage screeners—under P.L. 107-71 of 2001, which established the agency as part of the Transportation Department. Those policies were not changed when TSA was later moved into the Department of Homeland Security when that department was created by P.L. 107-296 of 2002 (see note below).

Screeners and related employees may bargain collectively, although only at the national level and only on certain issues, including performance management, awards and recognition, attendance management, and shift bids. Excluded subjects include compensation, proficiency testing, job qualifications, and disciplinary standards.

The Transportation Officer Performance System emphasizes on-the-job performance. At the beginning of each rating cycle management must establish and communicate written performance standards and expectations for employees, including benchmarks to be achieved and the measures to be used in assessing performance. The employee’s performance plan must include a schedule of progress reviews and is subject to revision when there is a significant change in the employee’s work situation such as a change in assignment. The system also includes provisions for ongoing communications, performance improvement plans and grievances of performance ratings.

TSA employees generally have, through law or negotiated contract, standard rights to appeal personnel decisions to the Merit Systems Protection Board, including alleged whistleblower retaliation, and rights to appeal lesser discipline through grievances. See Chapter 10, Section 3.

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. Elements of DCPIS include a specialized 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.

Note: The 2002 law establishing the Department of Homeland Security, P.L. 107-296, provided for alternative practices in areas such as pay setting, performance evaluation, job classification and discipline. However, due to funding restrictions and a lawsuit, those authorities never were put in place apart from a revised performance evaluation system for certain supervisors and managers. Ultimately, P.L. 110-325 of 2008 barred DHS from spending money to carry out those authorities and DHS revoked even that change.

Performance-Based Organizations

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 governmentwide 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 2000.

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