Other Pay Increases, Allowances or Actions
Within-grade increases, also known as “step increases,” are pay increases received by federal employees after they have served a specified amount of time at a certain grade level and demonstrated at least an acceptable level of performance. See 5 U.S.C. 5335 and 5 CFR 531 subpart D.
Generally, employees who are not at the highest step of their grade are entitled to receive the within-grade raise authorized for the next step of their position as long as they: complete the required waiting period, have received at least a “fully successful” (or equivalent) rating for their most recent performance appraisal period, and did not receive an equivalent increase in pay during the waiting period. (For a definition of “equivalent increase,” see 5 CFR 531.403 and 531.407.) They must also be occupying a permanent position, which means a position filled by an employee whose appointment is not designated as temporary and does not have a definite time limitation of one year or less. Permanent position includes a position to which an employee is promoted on a temporary or term basis for at least one year.
A WGI waiting period begins upon first appointment in the federal service, receipt of an equivalent increase, or after a period of non-pay status and/or a break in service in excess of 52 calendar weeks.
Civilian employment in any branch of the federal government (Executive, Legislative, or Judicial) or with a government corporation is creditable service in the computation of a waiting period. Service credit is given for periods of annual, sick, and other leave with pay and service under a temporary or term appointment. See 5 CFR 531.406 for special rules regarding the crediting of military service, time in a non-pay status, time during which an employee receives injury compensation, and certain other periods of service.
A within-grade increase is effective on the first day of the first pay period beginning on or after the completion of the required waiting period.
For an employee who performs service under a non-GS federal pay system which is potentially creditable towards a within-grade increase waiting period, an equivalent increase is considered to occur at the time of any of the following personnel actions:
• a promotion to a higher grade or work level (unless the promotion is cancelled and the employee’s rate of basic pay is redetermined as if the promotion had not occurred); or
• an opportunity to receive a within-level or within-range increase that results in (or would have resulted in) forward movement in the applicable range of rates of basic pay, meaning any kind of increase in the employee’s rate of basic pay other than an increase that is directly and exclusively linked to (1) a general structural increase in the employee’s basic pay schedule or rate range (including the adjustment of a range minimum or maximum) or (2) the employee’s placement under a new basic pay schedule within the same pay system. The personnel actions above must have occurred within the same pay system. That is, even if an employee receives an increase in pay moving between pay systems, that “promotion” or other pay increase is not considered an equivalent increase.
Under 5 CFR 531.405, waiting periods for within-grade increases for General Schedule grades are as follows:
• 52 calendar weeks to be advanced to steps 2, 3, and 4;
• 104 calendar weeks to be advanced to steps 5, 6, and 7; and
• 156 calendar weeks to be advanced to steps 8, 9, and 10.
For wage grade employees, the waiting periods are:
• six months to be advanced to step 2;
• 18 months to be advanced to step 3;
• two years to be advanced to step 4; and
• two years to be advanced to step 5.
A June 8, 2011 Office of Personnel Management memo to agencies (at www.chcoc.gov/transmittals) stressed that within-grade increases are not automatic and should not be granted to employees with ratings below the fully successful level.
Further information on eligibility requirements and payment procedures is at www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/within-grade-increases.
Quality Step Increases
Under 5 CFR 531 subpart E, a one-step increase to basic pay can be granted to recognize employees in the General Schedule who have received the highest available rating of record and meet agency criteria, and provide faster than normal progression through the step rates of the General Schedule. Unlike recognition awards, quality step increases permanently increase an employee’s rate of basic pay for retirement calculation and other purposes. No more than one may be granted to an individual employee in the same 52-week period.
A quality step increase can only be granted to an employee whose most recent rating of record is Level 5, or, if covered by an appraisal program that does not use a Level 5 summary, the employee receives a rating of record at the highest summary level used by the program and demonstrates sustained performance of high quality significantly above the “fully successful” level. Employees also must meet agency-specified criteria for qualifying for a quality step increase. A separate written justification is not required. However, OPM strongly encourages agencies to require some form of recorded justification. The agency should be able to show that the proposed recipient has performed at a truly exceptional level to justify a permanent increase in his or her rate of basic pay.
Peer nomination for quality step increases is permissible. However, some process would need to be set up to ensure that nominated employees meet the eligibility criteria. Also, under 5 CFR 531.501, final authority for granting quality step increases remains with management.
A quality step increase does not affect the timing of an employee’s next regular within-grade increase unless the quality step increase places the employee in step 4 or step 7 of his or her grade. In these cases, the employee becomes subject to the full waiting period for the new step—104 weeks or 156 weeks, respectively—and the time an employee has already waited counts towards the next increase. The employee receives the full benefit of receiving a within-grade increase at an earlier date and has not lost any time creditable towards his or her next within grade increase.
Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-
Pay Upon Promotion
General Schedule—An agency that promotes an employee from one General Schedule grade to another grade must set the employee’s pay at a rate of the higher grade that will pay at least the equivalent of a two-step increase in the grade from which the worker was promoted (see 5 U.S.C. 5334(b) and 5 CFR 531). When the two-step increase falls between step rates of the higher grade, the higher of the two rates is paid. When an employee’s official worksite is changed to a new location upon promotion where different pay schedules apply, the agency must convert the employee to the applicable pay schedule(s) and rate(s) of basic pay for the new official worksite based on the employee’s position of record before promotion before applying the two-step promotion rule.
An agency may use the maximum payable rate provisions (see below) to set an employee’s pay at a higher rate upon promotion. Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
Wage System—An agency that promotes an employee from one Federal Wage System grade to a higher one must set the employee’s pay at a rate of the higher grade that will pay at least 4 percent more than the payline rate (normally step 2) of the grade from which promoted.
Maximum Payable Rate
The maximum payable rate rule (see 5 CFR 531.221-223 and the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration) allows an agency to set pay for a General Schedule employee at a rate above the rate that would be established using normal rules, based on a higher rate of pay the employee previously received in another federal job. The pay set under the maximum payable rate rule may not exceed the rate for step 10 of the GS grade or be less than the rate to which the employee would be entitled under normal pay-setting rules. The maximum payable rate rule may be used in various pay actions, including re-employment, transfer, reassignment, promotion, demotion, or change in type of appointment.
The highest previous rate must be a rate of basic pay received by an employee while serving on a regular tour of duty under an appointment not limited to 90 days or less, or for a continuous period of not less than 90 days under one or more appointments without a break in service. The highest previous rate is:
• the highest rate of basic pay previously received by an individual while employed in a civilian position in any part of the federal government (including service with the government of the District of Columbia for employees first employed by that government before October 1, 1987), without regard to whether that position was under the GS system; or
• the highest rate of basic pay in effect when a GS employee held his or her highest GS grade and highest step within that grade.
For an individual who has had an extended break in service, an agency may compare the person’s highest previous rate to the applicable rate range in effect at the time and then adjust it to the current applicable rate range.
If the highest previous rate is a locality rate, the underlying GS rate or a law enforcement officer special basic rate associated with that locality rate must be used as the highest previous rate in applying the maximum payable rate rule.
An agency may use a GS employee’s special rate as the highest previous rate under certain circumstances.
Grade and Pay Retention
The grade and pay retention provisions provide pay protection for employees whose grade or pay is reduced due to a management action for which they are not responsible. If an employee is under grade or pay retention prior to transferring to another agency, the gaining agency generally must continue the employee’s grade or pay retention entitlement, absent the occurrence of one of the terminating events set forth in law and regulation, such as a break in service of one workday or more or demotion at the employee’s request.
Grade Retention—An agency must provide grade retention (see 5 U.S.C. 53 subchapter VI and 5 CFR 536) to an employee who moves from a position under a covered pay system to a lower-graded position under a covered pay system as a result of reduction-in-force (RIF) procedures or a reclassification process. An employee is eligible for grade retention as a result of a RIF only if the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than the grade of the position in which the employee is placed. An employee is eligible for grade retention based on a reclassification of his or her position only if, immediately before the reduction in grade, that position was classified at the existing grade or a higher grade for a continuous period of at least one year.
An agency may provide grade retention to an employee moving from a position under a covered pay system to a lower-graded position under a covered pay system when management announces a reorganization or reclassification decision in writing that may or would affect the employee and the employee moves to a lower-graded position (either at the employee’s initiative or in response to a management offer) on or before the date the announced reorganization or reclassification is effected. An employee is eligible for optional grade retention only if, immediately before being placed in the lower grade, the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than that lower grade.
An employee is entitled to retain the grade held immediately before the action that provides entitlement to grade retention for two years beginning on the date the employee is placed in the lower-graded position, unless grade retention is terminated. Eligibility for mandatory grade retention ceases or grade retention terminates if any of the following conditions occur: the employee has a break in service of one workday or more; the employee is reduced in grade for personal cause or at the employee’s request (based on the grade of the employee’s position of record rather than the employee’s retained grade); the employee moves to a position under a covered pay system with a grade that is equal to or higher than the retained grade (excluding temporary promotions); the employee declines a reasonable offer of a position with a grade equal to or higher than the retained grade; the employee elects in writing to terminate the benefits of grade retention; or the employee moves to a position not under a covered pay system. An employee whose grade retention benefits are terminated based on a declination of a reasonable offer of a position the grade of which is equal to or higher than his or her retained grade may appeal the termination to the Office of Personnel Management under 5 CFR 536 subpart D.
An agency must treat an employee’s retained grade as the employee’s grade for almost all purposes, including pay and pay administration and premium pay. If the employee’s actual position of record is under a different covered pay system than the covered pay system associated with the retained grade, the agency also must treat the employee as being under the covered pay system associated with the retained grade for the same purposes. For example, if an employee in a General Schedule position is placed in a lower-graded wage system position as a result of a RIF and retains the grade of the GS position, the agency must treat the employee as a GS employee for almost all purposes.
When an employee’s existing pay schedule is adjusted or a new pay schedule that covers the employee’s existing position of record (for the retained grade) is established (for example, establishment of a new special rate schedule) while the employee is entitled to grade retention, the employee receives the same pay adjustments as any employee at the same grade and step. An employee who is receiving a retained rate while entitled to grade retention is entitled to 50 percent of the increase in the maximum rate of the highest applicable rate range for the employee’s position and retained grade.
At the end of the two-year period, the grades of these employees will be lowered. Should their pay at that time exceed the maximum rate of their new grades, they will retain their current rate of pay except that their retained rate may not exceed 150 percent of the top rate of the grade to which they are reduced. Thereafter, if a general federal pay increase is awarded, the retained rate will be increased by 50 percent of the dollar increase in the maximum rate (for example, step 10) of the employee’s grade.
Such employees are eligible to receive the full amount of any applicable locality payment, in addition to the retained rate. If or when their pay is lower than or equal to the maximum rate of their new grades, they will be placed at the maximum rate and they will then receive the full General Schedule pay increase.
An employee is not eligible for grade retention if the employee was serving under a term or temporary appointment in the position from which he or she was downgraded as a result of RIF procedures. However, the fact that the employee accepts a temporary or term appointment in conjunction with being downgraded does not affect the employee’s entitlement to grade retention.
Similarly, if an employee who is already under grade retention receives a temporary or term appointment via reassignment or transfer, the employee would remain entitled to grade retention, unless one of the terminating events specified in law and regulation occur. (See 5 U.S.C. 5362(d) and 5 CFR 536.208.)
Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-
Pay Retention—An agency must provide pay retention (see 5 U.S.C. 53 subchapter VI and 5 CFR 536) to an employee who moves from a position under a covered pay system whose payable rate of basic pay would be reduced (after application of any applicable geographic conversion) as a result of: the expiration of the two-year period of grade retention under 5 CFR 536 subpart B; a RIF or reclassification action that places an employee in a lower-graded position when the employee does not meet the eligibility requirements for grade retention under 5 CFR 536 subpart B; a management action that places an employee in a non-special rate position or in a lower-paid special rate position from a special rate position; a management action that places an employee under a different pay schedule; a management action that places an employee in a formal employee development program generally utilized government-wide, such as upward mobility, apprenticeship, and career intern programs; the application of the promotion rule for GS or prevailing rate employees when the employee’s payable rate of basic pay after promotion exceeds the maximum rate of the highest applicable rate range; or a reduction or elimination of scheduled rates, special schedules, or special rate schedules (excluding a statutory reduction in scheduled rates of pay under the General Schedule or prevailing rate schedule). An agency may provide pay retention to an employee not entitled to mandatory pay retention whose payable rate of basic pay otherwise would be reduced as a result of a management action.
An agency may not provide pay retention to an employee who: is reduced in grade or pay for personal cause or at the employee’s request; was employed on a temporary or term basis immediately before the action causing the reduction in grade or pay; is entitled to receive a saved rate of basic pay under 5 CFR 359.705 because of removal from the Senior Executive Service; moves from an Executive Schedule or equivalent position; or moves between positions not under a covered pay system or from a position under a covered pay system to a position not under a covered pay system.
When the maximum rate of the highest applicable rate range for an employee’s position of record is increased while the employee is receiving a retained rate, the employee is entitled to 50 percent of the amount of the increase in that maximum rate. This 50 percent adjustment rule applies only when the maximum rate increases are attributable to the adjustment of the employee’s existing pay schedule or the establishment of a new pay schedule that covers the employee’s existing position of record (for example, establishment of a new special rate schedule).
A newly established retained rate may not exceed 150 percent of the maximum payable rate of basic pay of the highest applicable rate range for the grade of the employee’s position of record, or the rate for level IV of the Executive Schedule. In addition, a retained rate may not exceed the rate for level IV of the Executive Schedule. The 150 percent limitation is applicable only when a retained rate is established.
A retained rate is considered to be an employee’s rate of basic pay for the purpose of computing or applying retirement deductions, contributions, and benefits; life insurance premiums and benefits; premium pay; severance pay; and General Schedule and prevailing rate pay administration provisions.
Eligibility for pay retention ceases or pay retention terminates if any of the following conditions occurs (after applying any applicable geographic conversion): the employee has a break in service of one workday or more; the employee is entitled to a rate of basic pay under a covered pay system which is equal to or greater than the employee’s retained rate (excluding a rate resulting from a temporary promotion or temporary reassignment); the employee declines a reasonable offer of a position in which the employee’s rate of basic pay would be equal to or greater than the employee’s retained rate; the employee is reduced in grade for personal cause or at the employee’s request (based on the grade of the employee’s position of record rather than the employee’s retained grade); or the employee moves to a position not under a covered pay system.
Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-
Superior Qualifications and Special Needs Pay-Setting Authority
Agencies may set the rate of basic pay of a newly appointed employee at a rate above the minimum rate of the appropriate General Schedule grade because of the superior qualifications of the candidate, or a special need of the agency for the candidate’s services (see 5 U.S.C. 5333 and 5 CFR 531.212). The authority extends to an employee newly appointed (meaning first appointment to the federal government or reappointment after a break in service of at least 90 days) to any General Schedule position, including permanent and temporary positions in the competitive or excepted service. Under the Federal Wage System, special qualification appointments allow an employing agency to set pay at a rate above step 1 of the appropriate grade level for candidates with highly specialized skills in an occupation.
An agency may consider one or more of the factors listed in the rules, including a candidate’s existing pay, recent salary history, or salary in a competing job offer, or other relevant factors. In addition, agencies may impose their own restrictions beyond those in the regulations, such as a higher management approval level, limits on amounts to be paid, and restrictions on the use of the authority for certain positions or occupations.
The agency determines the step at which to set an eligible employee’s rate of basic pay. Under the rules, agencies must document: the superior qualifications of the individual or special agency need for the candidate’s services that justifies a higher minimum rate; the factor(s) and supporting documentation that were used to justify the rate at which the employee’s pay is set; and the reason(s) for authorizing a higher minimum rate instead of or in addition to a recruitment incentive under 5 CFR 575 subpart A.
Agencies must use the flexibilities in gender-neutral ways, for example so as not to disadvantage individuals returning to the workplace after a career break. See CPM 2014-06 at www.chcoc.gov/transmittals. Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
Incentive Awards and Payments
The basis for a federal agency granting an award to an individual or a group is that the contribution made benefits the government by reducing costs or improving government operations or services. Such awards may range from honorary recognition, such as a certificate or medal, to a cash award. Cash awards may be based on overall high-level performance, a special act or service, or a suggestion. Awards of over $10,000 are subject to OPM approval (except at the IRS and the Department of Defense), while those over $25,000 are subject to Presidential approval.
Regulations governing awards are at 5 CFR 451. Also see www.opm.gov/policy-data-oversight/performance-management.
Awards for suggestions, inventions, and special acts or services can be determined on the basis of benefits to the government, either tangible (measurable in dollars) or intangible (such as improved services to the public). When benefits to the government can be measured in dollars—such as reduction in production time, staff-hours, supplies, equipment, and/or space—awards sometimes are based on money saved during the first year the suggested improvement or other contribution is in effect. Performance-based cash awards, because they reward overall performance of assigned duties, typically represent a percentage of the employee’s basic pay and are granted as a lump-sum cash award. However, there are certain restrictions that apply when these awards are calculated as a percentage of basic pay.
In designing their award programs, agencies have a responsibility to look beyond the award regulations themselves and make sure that the specific reward and incentive programs that are being proposed do not conflict with other laws or regulations. Examples of other rules that can be directly related to incentive/reward schemes are procurement, travel, Fair Labor Standards Act, and tax withholding.
Relative comparisons among individuals or groups, such as rank ordering or categorizing employees, can be used for making decisions about distributing awards. For example, agencies may limit awards to the top three producers or teams, or limit awards to those individuals or groups that exceeded certain goals. Agencies can also establish criteria for categories of awards that are given only to a selected number of recipients who best fit the criteria, although the criteria might have been met by more than one person or team.
In addition to the forms of recognition described below, some agencies have developed awards to recognize individual and organizational achievement. These are used, for example, to emphasize the need for paperwork reduction, to improve safety, to increase productivity, as well as to support other management objectives. Also, a number of agencies use competitive-based awards to encourage further excellence in the performance of duties. Examples of these special awards include “Employee of the Year,” “Supervisor of the Year,” “Writer of the Year,” etc.
Certain monetary awards, including those necessary to comply with provisions in negotiated contracts, may be legally required. Others are considered discretionary and are paid only subject to availability of funds. The total amounts agencies may pay in certain types of awards, including quality step increases, time-off awards and Rank Awards, are restricted by memo M-13-11 at www.whitehouse.gov/omb/memoranda and May 17 and November 1, 2013 memos to agencies at www.chcoc.gov/transmittals. For senior executive and senior level/senior scientific and technical positions, Executive Order 13712 of 2015 raised the caps to 7.5 percent of total salary for such positions per agency from a prior cap of 4.8 percent.
Further, some agencies operate under specific limits. For example, under P.L. 114-113, the IRS is required to consider any misconduct and personal compliance with tax laws under any award, recognition or bonus program.
Rating-Based Awards—A performance-based cash award, commonly known as a rating-based award, is a lump-sum cash payment authorized by 5 U.S.C. 4505a and 5 CFR 451.104 of up to $10,000 without OPM approval and up to $25,000 with OPM approval. It requires only the most recent rating of record as the sole justification for the award. Agencies may calculate the awards as a lump-sum dollar amount, a percentage of base pay, or may use some other method such as assigning shares to rating levels.
If agencies grant rating-based awards, they must base such awards on a rating of record of “fully successful” (or equivalent) or higher and they must ensure that the awards make meaningful distinctions based on levels of performance. That is, employees with higher ratings of record must receive higher dollar amounts than those with lower ratings of record. For example, an award program must grant GS-9s who receive an outstanding rating a higher dollar amount than GS-9s who receive a fully successful rating. Agencies may use their discretion whether to pay rating-based awards as a lump-sum dollar amount or a percentage of base pay. Agencies using pass/fail programs must ensure that employees who receive a rating-based award for a “pass” rating performed at the equivalent of fully successful performance or better.
Agencies have the flexibility to establish their own policies, which may include specifying the rating level(s) needed to receive a rating-based award. There is no entitlement to any award.
Group Incentive Awards—Agencies can support continuing progress toward organizational goals by using gainsharing or goalsharing incentive programs. Gainsharing awards are designed to promote higher levels of performance through the involvement and participation of employees. As productivity improves, employees share in a portion of the financial gain. Goalsharing awards are triggered by reaching goals established for the group or organization as a whole.
Suggestion Programs—Some agencies have programs to reward employee ideas and innovations such as saving time, materials, or paperwork; simplifying procedures or processes; or improving services.
Rank Awards—Agencies annually nominate selected members of the Senior Executive Service for a Distinguished Rank Award or Meritorious Rank Award and similarly nominate senior level (SL) or senior scientific or technical (ST) employees to be honored as a Distinguished or Meritorious Senior Professional.
Rank awards are meant to recognize superior performance over an extended period. To be eligible, an SES, SL or ST employee must hold a career appointment and be an employee of the agency on the nomination deadline and have at least three years of career or career-type federal civilian service at that level (service need not be continuous but does not include non-career, limited term, or limited emergency appointments).
Agencies nominate individuals for rank awards in accordance with OPM criteria and instructions. For SES members, there is emphasis on achieving major program goals and exceeding customer expectations, as well demonstrating leadership through fostering employee development, cooperation and teamwork, and making best use of available resources. For senior professional employees, there is emphasis on recognition as a leader or authority in a field and on achieving outcomes that are technically or scientifically sound and cost-effective, and that yield rewards commensurate with the level of risk.
When considering potential nominees, agencies must exercise due diligence in reviewing the background of nominees (including any issues relating to conduct) as well as the programs and organizational components for which the nominees have any responsibility. In determining the number of nominations to submit, agencies must consider their fiscal conditions and the resources needed to meet their mission priorities.
OPM reviews the recommendations and recommends to the President which of those individuals should receive awards. Each agency may nominate up to 9 percent of its SES, SL or ST career appointees for rank awards. During any fiscal year the number of employees awarded the rank of Meritorious may not exceed 5 percent of the total number of career appointees in those positions and the number of employees awarded the rank of Distinguished may not exceed 1 percent.
Receipt of the Distinguished rank award entitles the individual to a lump-sum payment of an amount equal to 35 percent of annual basic pay, in addition to the basic pay paid under 5 U.S.C. 5376 or 5382, or any award paid under 5 U.S.C. 5384. Receipt of the Meritorious rank award entitles the individual to a lump-sum payment of an amount equal to 20 percent of annual basic pay, in addition to the basic pay paid under 5 U.S.C. 5376 or 5382, or any award paid under 5 U.S.C. 5384. Payment of rank awards must comply with the restrictions on annual aggregate compensation at 5 U.S.C. 5307.
Other Cash Awards—Federal agencies also can make other types of cash awards to recognize exceptional performance or a significant achievement on the part of an individual employee or group of workers. Types of recognition and examples of the kind of contributions that can earn recognition include:
Special Act or Service Awards—These usually are lump-sum cash awards to recognize specific accomplishments that are in the public interest and have exceeded normal job requirements. Special act or service awards are based on contributions such as work on a special project, performance exceeding job requirements on a particular assignment or task, a scientific achievement, or an act of heroism. These awards can be for individual or group contributions. On-the-spot awards are special act or service awards which normally provide immediate recognition for employees.
Quality Step Increases—Quality step increases are one-step increases to basic pay as a form of performance recognition. See Quality Step Increases, above.
Cash Surrogates—Cash surrogates are an option for cash awards, subject to the limitations and requirements that apply to cash awards. Examples of cash surrogates are “award vouchers” created by the agency itself that can be exchanged for currency through its imprest fund and “gift cheques” that are purchased through a vendor and that are easily and widely redeemable for cash, not merchandise. Recipients of cash surrogates must have the same freedom and control over how that award may be used as they would have over any currency or U.S. Treasury check they might otherwise receive as a cash award, including the option of saving the money or turning it over to any third party (for example, a charity or other individual).
Time-off Awards (TOAs)—A TOA is a grant of time off without charge to leave or loss of pay to an employee as an individual or member of a group. A TOA may not be converted to cash.
Technically, there is no legal bar to offering employees a choice between cash and time-off award. However, OPM strongly recommends that agencies not offer such a choice. To do so would put the employee who opts for time-off in “constructive receipt,” for tax withholding purposes, of the cash award offered. Appropriate withholding based on the cash award offered would have to be done at the time the choice is offered (that is, when the employee reasonably would be expected to receive the cash), rather than based on the pay associated with the time off when the time off is actually taken.
Training or Equipment as an Award—An agency may provide training or purchase equipment as a form of award within a recognition program that contemplates such forms of recognition. It would be subject to all relevant training and procurement regulations, limitations, and requirements.
Honorary Awards—An honorary award is a gesture of respect given to an employee to recognize his or her performance and value to the organization. Honorary awards are generally symbolic. Many agencies include as part of their overall incentive awards programs a traditional form of high-level, formal “honor awards.” A listing of honor awards sponsored by a variety of federal and nonfederal organizations is at www.opm.gov/policy-data-oversight/performance-management/awards-list.
Often, such honor award programs do not use monetary recognition, but emphasize providing formal, symbolic recognition of significant contributions and publicly recognizing employees as examples for other employees to follow. They typically involve formal nominations, are granted in limited numbers, and are approved and presented by senior agency officials in formal ceremonies. The items presented, such as engraved plaques or medals, are principally symbolic in nature. Many honorary awards are provided along with cash or time-off awards. As mementos, such non-monetary honorary award items may be of only nominal value (for example, simple certificates in inexpensive frames, lapel pins, paperweights). Nonetheless, all items used as honorary awards must meet specific criteria.
Customer Service Awards—The Federal Customer Service Awards Program recognizes federal employees for achievements in improving services provided to citizens and organizations. While the program formally applies only to certain larger departments and agencies that have the most direct interaction with the public, all agencies are encouraged to adopt similar awards.
Individual awards recognize employees for specific accomplishments, professionalism and commitment to customer service, while initiative awards recognize improvements in operations or other innovations by a team, with a limited number of key individuals recognized in particular for their contributions.
Annual agency-level awards are available in varying numbers depending on the size of the agency and the scope of interactions with the public. In addition, a Presidential award is available to a limited number of those nominated by their agencies. All awards are non-monetary, although agencies may have discretion to offer a monetary component as well. See OMB Memo M-15-09 of March 19, 2015 at www.whitehouse.gov/omb.
Informal Recognition Awards—Informal recognition awards are a type of award that may be given to reward performance that otherwise might not merit an award such as cash, time-off, or an honorary award. Agencies use these awards to provide more frequent and timely informal recognition to employees. Items presented as informal recognition awards must be of nominal value and must take an appropriate form to be used in the public sector and to be purchased with public funds.
Referral Bonuses—Agencies can use the incentive awards authority (5 U.S.C. 4503 and 5 CFR 451) to establish a referral bonus program that provides incentives to employees who bring new talent into the agency. A referral bonus goes to the person who refers a job applicant who is selected and successfully employed, not to the new employee.
Referral bonuses can take the form of cash awards or grants of paid time off. For example, a certain amount might be granted for making a referral, an increased amount if the person is hired and an additional increase if the person works for the agency for a defined period. Amounts also may increase for making subsequent referrals.
Each agency must determine whether and under what circumstances using referral bonuses is appropriate. OPM guidance says these bonuses might be suitable for employees whose regular job duties do not include recruitment, but who promote employment with their agency and refer potential new employees to their human resources offices. An agency must ensure that its referral bonus program does not violate the legal requirements for broad public awareness of job openings; recruitment from appropriate sources to seek a workforce drawn from all segments of society; and hiring selections based solely on relative ability, knowledge, and skills after a fair and open competition that assures equal opportunity to all candidates. See www.opm.gov/policy-data-oversight/performance-
Agencies may recognize the outstanding accomplishments of their employees whose job is to recruit and hire new employees through their regular awards processes.
Non-Foreign Area Allowances and Differentials
Non-Foreign Area COLAs—Through 2009, federal agencies paid cost-of-living allowances (COLAs) of up to 25 percent of basic pay to certain employees stationed in Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. These “non-foreign area” COLAs were not taxable but did not count as basic pay toward retirement benefits. Rates were based on comparisons with living costs in Washington, DC. Most of the affected employees were in the General Schedule, but the program also applied to employees in several high-level salary systems such as the Senior Executive Service as well as to employees paid under the Postal Service Schedule.
P.L. 111-84 of 2009 replaced those COLAs over 2010-2012 with locality pay, which does count toward retirement benefits, under the same system applying to employees in the contiguous 48 states. The COLAs were phased out on a schedule designed to preserve the take-home salaries of those employees as the nontaxable COLA was replaced with taxable locality pay. Alaska and Hawaii each were established as separate locality pay areas, while the other non-foreign areas are part of the “rest of the U.S.” locality.
Special provisions apply to certain postal employees, special rate employees, members of the Senior Executive Service, and those in agency-specific personnel systems. See Non-foreign Area Service in Chapter 3, Section 4 for considerations regarding crediting toward retirement for service during the transition. Also see www.opm.gov/policy-data-oversight/pay-leave/pay-systems/nonforeign-areas.
Post Differentials—Non-foreign post differentials are allowances of up to 25 percent of the employee’s basic pay, paid to compensate employees required to work in areas where there are extraordinarily difficult living conditions, excessive physical hardship, or notably unhealthful conditions. The current rates are 25 percent in American Samoa and its island group, Johnston Island, Sand Island, Midway Islands and Wake Island, and 20 percent in Guam and the Northern Mariana Islands.
Post differentials are subject to income tax. They do not count for federal retirement purposes. Further information is available at the above online address.
Extended Assignment Incentives
Under 5 U.S.C. 5757 and 5 CFR 575 subpart E, agencies may pay an extended assignment incentive (EAI) to eligible federal employees assigned to positions located in a territory or possession of the United States, the Commonwealth of Puerto Rico, or the Commonwealth of the Northern Mariana Islands to assist the agencies in retaining experienced, well-trained employees in these locations for a longer period than the employee’s initial tour of duty. The incentive is payable if the employee has completed at least two years of continuous service in one of those areas and the agency determines that replacing the employee would be difficult and that it is in the best interest of the government to encourage the employee to complete a specified additional period of employment with the agency in one of the covered locations. The employee must sign a written service agreement to complete a specified period of additional employment; the total amount of service an employee may perform in a particular territory, possession, or commonwealth under one or more EAI service agreements with an agency may not exceed five years.
The payment may not exceed the greater of 25 percent of the annual rate of basic pay or $15,000 per year in the service period. An EAI is not considered part of an employee’s rate of basic pay for any purpose. See the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
The Secretary of State authorizes danger pay under 5 U.S.C. 5928 for locations in foreign areas in which civil insurrection, terrorism, wartime conditions and similar conditions threaten physical harm or imminent danger to the health or well-being of employees.
Danger pay is authorized at rates of up to 35 percent, in 5 percentage point increments. Danger pay is payable to eligible civilian employees accompanying military members authorized to receive imminent danger pay by the Secretary of Defense. This allowance is the same amount paid to uniformed military personnel, calculated on a daily basis. A list of currently authorized danger pay allowances is at http://aoprals.state.gov/web920/danger_pay_all.asp.
Under 5 CFR 531, a locality rate of pay is considered basic pay for the purpose of computing danger pay allowances for certain employees temporarily assigned to work in foreign areas for which the Department of State has established a danger pay allowance.
Foreign Post (Hardship) Differential
The State Department authorizes a foreign post differential under 5 U.S.C. 5925 when it determines that an overseas location involves extraordinarily difficult living conditions, excessive physical hardship, or notably unhealthful conditions affecting the majority of government employees assigned to the location. Living costs are not considered in the differential determination.
A foreign post differential is authorized at rates of up to 35 percent, in 5 percentage point increments. The differential is payable as a percentage of pay, including applicable locality rates, to individuals officially assigned to a post who are also eligible for a living quarters allowance. Additionally, the differential is payable to employees on detail to such posts after 42 consecutive days at the post. A list of currently authorized foreign post differentials is at http://aoprals.state.gov/web920/hardship.asp.
Foreign Language Proficiency Pay
Some departments and agencies offer foreign language proficiency pay—in some cases, the programs are known by different but similar names—for employees in positions in which proficiency in a language is important to the duties. Terms of the programs vary. In some cases employees are required to pass oral or written proficiency tests and have their fluency rated on a scale.
The pay is given at management’s discretion and may be awarded in terms of a dollar amount per pay period or as a percentage of basic pay up to a cap, commonly 5 percent. The amount can vary according to the level of proficiency, the level of need for proficiency in that language, the difficulty in recruiting and retaining proficient speakers, the extent to which the position requires proficiency, the number of languages in which the employee is proficient, and other factors. In some cases certain terms of the programs are subject to collective bargaining agreements. The Defense and Homeland Security departments as well as certain intelligence agencies make the greatest use of such pay. The pay is not considered basic pay for any purposes and thus does not count toward retirement, insurance, or any other benefit related to pay.
Hostile Fire Pay
Under 5 U.S.C. 5949, the head of an executive agency may pay an employee hostile fire pay for any hostile action that took place on or after September 11, 2001. The law provides agencies with the authority to pay hostile fire pay at a rate of $150 for any month in which the employee is:
• subject to hostile fire or explosion of hostile mines;
• on duty in an area in which the employee was in imminent danger of being exposed to hostile fire or explosion of hostile mines and in which, during the period of duty in that area, other employees were subject to hostile fire or explosion of hostile mines; or
• killed, injured, or wounded by hostile fire, explosion of hostile mine, or any other hostile action.
Agencies may pay hostile fire pay to an employee hospitalized for the treatment of an injury or wound for not more than three additional months during which the employee is hospitalized. The law prohibits the payment of hostile fire pay for periods during which an employee receives post differentials because of exposure to political violence, or danger pay allowances.
Evacuation payments (see 5 U.S.C. 5522-5524, 5 U.S.C. 5526-5527, and 5 CFR 550 subpart D) are made to employees or their dependents, or both, who are ordered to be evacuated from or within the United States and certain non-foreign areas in the national interest because of natural disasters or for military or other reasons that create imminent danger to the lives of the employees, their immediate family, or their dependents. (Note: Employees’ same-sex domestic partners and their children may qualify, under 5 CFR 550.402; see Domestic Partners in Chapter 8, Section 4 for standards.)
The applicable non-foreign areas are listed in the definition of “United States area” in 5 CFR 550.402. Evacuation payments may be made to dependents 16 years of age or older, or to designated representatives, only with prior written authorization from the employee.
When an employee has been ordered to evacuate, agency heads may make advance payments of pay, allowances, and differentials to cover up to 30 calendar days, provided the agency head or designated official determines the payment is required to defray immediate expenses incidental to the evacuation. The initial evacuation payment may cover up to 60 days of pay, allowances, and differentials, including the period covered by the advance payment.
Evacuation payments may be made to cover a total of up to 180 calendar days (including the number of days for which payment has already been made) when employees continue to be prevented from performing their duties by an evacuation order. Employees may also receive additional allowance payments for travel expenses and subsistence expenses (per diem) to offset added expenses they incur as a result of their evacuation or the evacuation of their dependents. (See 5 CFR 550.405.)
Not later than 180 days after the effective date of the order to evacuate, or when the emergency or evacuation is terminated, whichever is earlier, an employee must be returned to his or her regular duty station or reassigned to another duty station. Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
Under 5 CFR 550.409(b), an agency may provide evacuation payments to an employee who is ordered to evacuate from his or her regular worksite and directed to work from home or an alternative location mutually agreeable to the agency and the employee during a pandemic health crisis. An employee need not have a telework agreement when directed to work from home. Policy on payments in this situation is in a fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
A separate authority applies to employees in foreign areas paid under Chapter 600 of the Department of State Standardized Regulations. Evacuation payments consist of a subsistence allowance to help cover the costs of lodging, meals, laundry, and dry cleaning; local transportation at the safe haven; and an air freight replacement allowance if air freight is not shipped from post. Subsistence amounts are based on the safe haven’s per diem rate if the family is occupying commercial quarters, and vary based on family size. Meals and incidental expenses payments decrease over time. Evacuation payments terminate no later than 180 days after the evacuation order is issued.
Generally, the United States is designated as the official safe haven, and evacuees are required to return to the U.S. to receive allowances. An employee may request designation of an alternate foreign safe haven for special family needs but approval is not guaranteed. See www.state.gov/m/dghr/flo/c1991.htm.
A supervisory differential may be paid to a supervisor under the General Schedule where a subordinate not under the General Schedule otherwise would be earning an equal or greater salary. The supervisor must be providing direct, technical supervision of the subordinate to qualify. Regulations at 5 CFR 475.405 define what types of compensation are used in the comparison.
The differential may not exceed 3 percent of the subordinate’s salary and must be ended when the continuing pay of the supervisor (not including the supervisory differential) exceeds the continuing pay of the highest paid subordinate whose position is not under the General Schedule.
The differential also may be terminated or reduced when the agency deems it appropriate under its procedures, such as when the subordinate leaves his or her position or suffers a pay reduction. The reduction or termination of a supervisory differential may not be appealed.
A supervisory differential is not considered part of the supervisor’s rate of basic pay for any purpose.
Physicians Comparability Allowances
Agencies may pay physicians comparability allowances to recruit and retain highly qualified government physicians. In return, the physician must sign at least a one-year service agreement with the agency. The head of an agency determines the size of the allowance, which may not exceed $14,000 yearly for a physician who has served as a government physician for 24 months or less or $30,000 annually for a physician who has served as a government physician for more than 24 months. Office of Management and Budget approval is required. Physicians comparability allowances are basic pay for retirement purposes if certain criteria are met (see 5 U.S.C. 5948 and 5 CFR 595). Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
Under 5 U.S.C. 5901(a), when federal employees are required to wear a uniform in the performance of their duties—such as police officers, firefighters, customs and border patrol officers and some medical personnel—agencies must pay a uniform allowance, typically of up to $800 a year, or furnish a uniform at a cost not to exceed a similar amount. Specific terms may be set by contract in unionized settings. Agencies have discretionary authority to establish a higher initial (but not recurring) uniform allowance under 5 CFR 591.104. Also see the fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.
Remote Worksite Allowances
Under 5 U.S.C. 5942, an agency must pay a remote worksite allowance, also known as remote duty pay, of up to $10 a day to an employee who is assigned to non-temporary duty at a site that the agency determines is so remote from the nearest established communities or suitable places of residence as to require an appreciable degree of expense, hardship, and inconvenience beyond that normally encountered in metropolitan commuting.
Rules at 5 CFR 591.306(a) also provide for payment of the allowance where daily commuting is impractical because the location of the duty post and available transportation are such that agency management requires employees to remain at the duty post for their workweek as a normal and continuing part of their conditions of employment.
What is Subject to Garnishment—Under 5 CFR 581 and 582, the types of active employee payments that are subject to garnishment pursuant to an order for child support, alimony, or commercial garnishment include virtually all forms of pay, ranging from basic pay to various forms of premium pay, special allowances and awards, overtime, differentials, special pay adjustments, incentives, and severance pay. Also subject to garnishment are retirement benefits, dependents’ or survivors’ benefits, refunds of retirement contributions, employee and government contributions to the Thrift Savings Plan, and injury compensation payments.
However, certain types of payments are not subject to garnishment. These include compensation for death under any federal program, benefit payments under “black lung” programs, and Department of Veterans Affairs-paid pensions and service-connected disability or death benefits. Also exempt are reimbursements for expenses incurred by an individual in connection with employment such as travel, transportation, relocation and storage expenses, per diem, along with such allowances and payments as post differentials and allowances, and allowances for uniforms, living in foreign areas, education for dependents, maintenance, home service transfer, quarters, and remote worksites.
In determining the amount of disposable income that can be garnisheed, certain payments are excluded. These include payments for debts owed to the United States, mandatory retirement deductions, Medicare deductions, health insurance and Federal Employees Dental and Vision Insurance Program premiums, and deductions for Basic (but not optional) life insurance under the Federal Employees’ Group Life Insurance program. Funds deducted and deposited in a health savings account are not excluded because an HSA is not considered insurance but rather a savings product (see IRS Publication 969).
Additional restrictions apply to certain federal benefit payments, including federal retirement and Social Security benefits, that are paid by direct deposit. When a financial institution receives a garnishment order against an account holder who receives such benefits, the institution must first determine if the United States or a state child support enforcement agency is the plaintiff that obtained the order. If so, the institution follows its customary procedures for handling the order. If not, the institution must review the account history for the prior two-month period to determine whether, during that period, one or more exempt benefit payments were directly deposited to the account. It must leave in the account an amount equal to the lower of: the account balance at that time or the sum of exempt benefit payments deposited to the account in the prior two months.
In addition, unless the account balance is zero or negative as of the account review, the financial institution must notify the account holder that it has received the garnishment order and provide information regarding the account holder’s rights.
For an account containing a protected amount, the institution may not collect a garnishment fee from the protected amount. The institution may only charge a garnishment fee against funds in the account in excess of the protected amount and may not charge or collect a garnishment fee after the account review.
The provisions affecting federal retirement are at 5 CFR Parts 831 and 841, and those affecting Social Security are at 20 CFR Parts 404 and 416. The same policy applies to certain veterans’ benefits under 38 CFR 1.
Non-Tax Debt Owed to the Government—Agencies are allowed to make deductions, within certain limits, from an employee’s wages to help pay a non-tax debt owed by the worker to the federal government. Generally, under 5 U.S.C. 5514, federal agencies (including a non-appropriated fund instrumentality of the Department of Defense or United States Coast Guard) are authorized to liquidate an employee’s government indebtedness by making installment deductions, or requiring the debtor’s employing agency to make such deductions, in amounts not to exceed 15 percent of the employee’s disposable pay. OPM may garnishee the disposable pay of an individual to collect delinquent non-tax debts owed to the United States without first obtaining a court order. OPM rules at 5 CFR 179 incorporate Treasury Department procedures at 31 CFR 285; similar rules governing U.S. Postal Service employees specifically are at 39 CFR 492.
Before any deductions may be withheld, the agency generally must notify the employee of its intention to collect the debt by setoff and provide notification of the employee’s right to request reconsideration or a waiver of the indebtedness, and of the employee’s right to an administrative hearing conducted by an individual who is not subject to the control of the head of the claiming agency. (If an agency chooses this alternative, the hearing is before an administrative law judge.) There is no statute of limitations for collection by salary offset of non-tax debt owed to the federal government.
Under 5 CFR 550.1104, agencies set their own policies, subject to OPM approval, governing internal procedures, and specify requirements for notification and other employee rights. Separate policies apply to collection of debts outstanding more than 10 years as of June 11, 2009.
In the event a debtor-employee retires or resigns or otherwise terminates employment before the amount of the indebtedness is completely collected, agencies are authorized to make deductions from later payments of any nature due the individual (for example, from lump-sum payments for leave or retirement contributions; see 5 CFR 550. 1101 et seq.).
The agency head may (with some exceptions) waive the repayment of an erroneous overpayment of pay or allowances under 5 U.S.C. 5584. Employees also may question the validity of their indebtedness by filing an appeals claim.
In addition, under Section 124 of P.L. 97-276, the government is authorized to enforce a civil judgment against a federal employee involving debts owed the U.S. government through a setoff action against the worker’s pay, without having to resort to the administrative procedures applicable to a debt collection action under 5 U.S.C. 5514. The limitation on offsets of pay under a civil judgment is 25 percent of an employee’s pay. Should the employee retire, resign, or terminate employment before the collection is completed, deductions may be made from later payments due the individual, such as lump-sum leave or retirement payments.
Regulations at 5 CFR 831.1801 govern setoff of an agency debt against money payable to the debtor from the Civil Service Retirement and Disability Fund. OPM’s regulations require certification by the agency claiming the debt that it has complied with the applicable administrative procedures before the setoff can be carried out. Under current regulations, no more than 50 percent of a retiree’s net annuity will be withheld, except in cases of fraud or misrepresentation.
Regulations at 5 CFR 831 subpart R govern recovery of an overpayment of annuity. In such a situation, OPM generally notifies the annuitant of the amount of the overpayment, the reason(s) it occurred, the right to request reconsideration, waiver and/or compromise, and entitlement to a hearing, if any exists. There is no set limitation on the amount that may be deducted from annuity payments to recover an overpayment of annuity.
Some departments and agencies participate in the Treasury Offset Program, http://fiscal.treasury.gov/fsservices/gov/debtColl/dms/top/debt_top.htm, a centralized debt collection program to assist agencies in the collection of delinquent debts owed to the federal government. Under the program, delinquent accounts are subject to administrative offset of government funds due individuals from various sources such as federal income tax refunds, federal salary offset, and payments from other government agencies. Administrative offset is authorized of 100 percent of the balance of the debt from federal income tax refunds, and 15 percent of monthly disposable income from federal annuity and Social Security Administration payments.
Child Support or Alimony—To enforce alimony and child support obligations, the salaries of federal and postal employees, as well as retirees’ annuity payments and Social Security benefits, are subject to garnishment. See Chapter 7, Section 6.
General or Commercial Garnishment—Federal employee pay can be docked to satisfy private debts and state and local tax indebtedness, under 5 U.S.C. 5520a and 15 U.S.C. 1673 (see 5 CFR 582). Under the law, federal employees are entitled to similar legal protections (except for cases of tax indebtedness) afforded private sector workers under the Consumer Credit Protection Act. That law specifies legal procedures to be followed and places limits on the percentage of an employee’s salary that can be dunned. Agencies must honor orders (writs) from any “court of competent jurisdiction,” in most cases meaning state courts. A writ must be served on the proper agency officials, who will have to notify the employee within 15 days. Agencies will have to honor writs for the collection of any legal debt of the employee and for recovery of attorney’s fees, interest and court costs.
In most cases, such orders specify the total amount that must be taken from the employee’s salary. Agencies will have to honor those orders up to the limits set by the consumer protection law. Generally this is up to 25 percent of net salary. In some places, however, state law sets different limits.
The percentage limits apply after mandatory deductions such as retirement contributions and taxes are taken out. Virtually all forms of pay except for suggestion awards will be counted toward the salary base.
Child support and alimony orders take priority over orders for collecting private, nonfederal debts. If more than one writ is being served, the first one will take priority.
The law applies to Executive Branch, postal, Legislative, and Judicial employees, but not to retiree annuities. Annuities can be docked only for child support, alimony and debts owed to the government.
Back Pay Awards
Regulations at 5 CFR 550 subpart H carry out 5 U.S.C. 5596, which authorizes the payment of back pay, interest, and reasonable attorney fees for the purpose of making an employee financially whole when the employee is found by an appropriate authority—such as an appeals agency or a decision arising from an unfair labor practice complaint or a grievance—to have been affected by an unjustified or unwarranted personnel action that resulted in the withdrawal, reduction, or denial of all or part of the pay, allowances, and differentials otherwise due to the employee.
In such cases, the agency must compute for the period covered by the corrective action the pay, allowances, and differentials the employee would have received if the unjustified or unwarranted personnel action had not occurred. The amount is reduced by deductions of the type that would have been made from the employee’s pay such as retirement contributions, Social Security, Medicare and other taxes, and insurance premiums.
Interest begins to accrue on the date or dates on which the employee would have received the pay, allowances, and differentials if the unjustified or unwarranted personnel action had not occurred. Rates are in a fact sheet at www.opm.gov/policy-data-oversight/pay-leave/pay-administration.