June 11, 2011 at 12:53 pm #132690
Subject: Guidance on Awards for Fiscal Years 2011 and 2012
Federal agencies are authorized to grant awards to their employees to recognize and reward excellence in performance.Given the current fiscal environment, and the budget constraints agencies will operate under for the remainder of fiscal year 2011, as well as those reflected in the President’s fiscal year 2012 budget proposal, these awards must be carefully considered. It is critical that these awards be managed in a manner that is cost-effective for agencies and successfully motivates strong employee performance.
When the President made the decision to propose a two-year pay freeze beginning in January 2011, he directed the Office of Personnel Management (OPM) and the Office of Management and Budget (OMB) to evaluate the system of performance awards and incentives for cost and effectiveness. Consistent with previous Government Accountability Office reviews of Federal agencies’ use of awards and incentives, we have identified a number of concerning trends. In many cases, awards are broadly and inconsistently allocated and some Federal employees have come to expect awards as part of their compensation. At the same time, recent survey results show that a large number of both agency managers and employees do not perceive the current employee performance management/award systems to be fair or accurately reflect differences in performance levels.
As a result of these findings, and in keeping with the need to manage budget resources carefully, OPM and OMB are issuing this memorandum on budgetary limits on individual awards during fiscal years 2011 and 2012. This memorandum provides guidance applicable to all departments and agencies (referred to collectively as agencies), was developed in consultation with the President’s Management Council, and has been informed by a review of recent agency award practices. This guidance specifically calls on agencies to adopt more rigorous employee performance management processes that incorporate consistent supervisor communication and feedback, establish accountability at all levels, and provide transparent and credible appraisal systems. To assist agencies in this effort, OPM and OMB are working with agency Chief Human Capital Officers and the National Council on Federal Labor-Management Relations to identify best practices for improving the employee performance management system so that the performance appraisal and award systems fairly reflect performance distinctions and effectively motivate employees.
While implementing this guidance, agency executives retain flexibility to allow for group and individual recognition in ways that are meaningful, fair, and clearly distinguish levels of performance. In exercising their discretion in this area, agencies are reminded to honor all collective bargaining obligations and discuss agency award programs in agency labor-management forums.
Budgetary Limitations for Awards Granted during Fiscal Years 2011 and 2012
Agencies must reduce total spending on individual performance awards for members of the Senior Executive Service (SES) and senior-level and scientific and professional employees (SL/ST) to no more than five percent of aggregate salaries. Agencies must also reduce award spending for non-SES/SL/ST performance awards and individual contribution awards (e.g., special act) for all employees to no more than one percent of their aggregate salaries. These award spending targets apply for awards with effective dates during fiscal year 2012, with progress toward that level in fiscal year 2011, as reported to OPM under the agencies’ regular reporting procedures.
A review of recent and historical Government-wide spending formed the basis for setting these limits, which preserve agency flexibility to decide which specific awards within their programs to fund and at what levels. For many agencies, these award limits will require a reduction from current award spending levels. Agencies already spending at or below these levels must continue to limit spending to their fiscal year 2010 levels. In implementing these limitations, agencies should provide for equitable distribution of awards between managers/supervisors and non-supervisory employees.
These budgetary limitations do not apply to political appointees. The President’s August 3, 2010, memorandum freezing discretionary awards, bonuses, and similar payments for political appointees applies through the end of fiscal year 2011. Agencies should continue to apply this freeze in fiscal year 2012 in accordance with OPM’s guidance at http://www.chcoc.gov/Transmittals/TransmittalDetails.aspx?TransmittalID=3060.
The budgetary limits specified in this memorandum apply to spending for individual awards only, which include rating-based performance awards and individual special act awards. Other awards and incentives are frozen at fiscal year 2010 spending levels, except travel savings and foreign language awards. Agencies are encouraged to leverage existing award programs to reward employees who identify improvements that result in documented, validated cost savings and productivity improvements. An emphasis on awards of this nature is particularly important in light of the fiscal challenges we are facing.
Recruitment, relocation, and retention incentives are not awards and are not covered by the budgetary limits. However, agencies are expected to ensure prospectively that spending on these incentives in calendar year 2011 and calendar year 2012, respectively, does not exceed calendar year 2010 levels. Quality step increases are another rating-based payment that does not constitute an award. These payments are not covered by the one percent budgetary limit; however, agencies may not exceed their 2010 fiscal year spending levels on quality step increases granted during fiscal years 2011 and 2012.
The budgetary limits specified in this memorandum are intended to apply to all awards programs in Executive branch agencies covering members of the SES and non-SES civilian employees, including SL/ST, wage grade and others. Agencies have the flexibility, however, to apply these budgetary limits to awards programs for other employees to accommodate current budget constraints. Agency Chief Human Capital Officers and/or Human Resources Directors should contact Stephen T. Shih, Deputy Associate Director for Executive Resources and Employee Development, in OPM’s Employee Services by telephone at (202) 606-8046 or by e-mail at [email protected] immediately if an agency believes a specific awards program is excluded from the spending limits specified in this memorandum. Furthermore, if an agency determines to exclude a specific awards program, the agency must report its determination to the Director of OPM by submitting an email detailing the justification for the exclusion to [email protected].
The budgetary limits specified in this memorandum take effect as of the date of this memorandum and remain in effect for awards with effective dates during fiscal year 2012, with progress toward the limits for awards with effective dates in fiscal year 2011, as reported to OPM under the agencies’ regular reporting procedure.
for additional information including a FAQ section visit http://www.chcoc.gov/transmittals/TransmittalDetails.aspx?TransmittalID=3997
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