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This Directive was canceled August 5, 2004.

Order
Subject
Personnel Management Manual: Part 1, Chapter 6: Pay, Allowances and Other Payments, Section 4: Recruitment, Relocation and Retention Incentives
Classification Code Date
M3000.1B June 28, 1996  

  1. What is the purpose of this directive? This directive provides guidance for determining and awarding recruitment, relocation, and retention bonuses in FHWA.

  2. Does this directive cancel an existing FHWA directive? Yes. This directive cancels the outdated FHWA Personnel Management Manual Chapter 6, Section 4, dated June 28, 1996.

  3. What is the background concerning this directive? This directive reflects changes in Office of Personnel Management (OPM) regulations designed to provide agencies with greater flexibility in paying recruitment, relocation, and retention bonuses to recruit and retain high-quality employees. This directive also reflects the delegation of authority within FHWA for approving or rejecting bonus award nominations.

  4. What are the pertinent references?

    1. 5 U.S.C. 5753 and 5754
    2. 5 CFR 575, subparts A, B, and C, dated January 1, 2000

  5. What are the agency requirements for using the bonus authorities? Agencies are required to establish criteria to be met or considered in authorizing bonuses, including criteria for determining the amount of bonuses. Agencies must also implement procedures for paying bonuses, and designate officials with authority to review and approve payment of bonuses. Documentation and record-keeping requirements must also be specified.

  6. What is a recruitment bonus and under what conditions is it authorized? A recruitment bonus is a lump-sum payment of up to 25 percent of basic pay that an agency may pay to a new employee in a difficult-to-fill position. A recruitment bonus may be paid to an employee who (1) has not yet entered on duty, (2) has accepted a written offer of employment, and (3) has signed a service agreement to fulfill a specific period of service, not less than 6 months.

    1. Covered positions. Recruitment bonuses may be paid to eligible individuals who are appointed to a General Schedule (GS) position or to another type of position for which such payments have been approved by OPM. By regulation, OPM has approved coverage of certain positions, including senior-level and scientific or professional (SL/ST), Senior Executive Service (SES), and Executive Schedule positions (except agency heads). Agencies may not pay a recruitment bonus to the head of an agency. OPM may approve other categories upon written request from the head of the employing agency.

    2. Qualifying appointments. Recruitment bonuses may be paid to an employee who is "newly appointed" to the Federal Government, including an employee reappointed with a 90-day break in service. Temporary, seasonal, or part-time employees are eligible, provided all other requirements are met. For example, an individual who receives a temporary appointment is eligible as long as the temporary appointment lasts at least 6 months.

    3. Continued service agreement. Before receiving a recruitment bonus, an employee must sign a written agreement to complete a specified period of employment with FHWA. The minimum required service agreement period for a recruitment bonus is 6 months, but any amount of time beyond that may be appropriate, depending on the demands of the job, the difficulty of recruiting, and the amount of the bonus. The general objective is to establish as long a required service agreement period as feasible without detracting from the incentive value of the bonus. For example, if a high bonus percentage is offered, then a longer service agreement period should be required.

    4. Criteria for approval. Each bonus must be based on a written determination that, in the absence of such a bonus, FHWA would have difficulty in filling the position. In determining whether a bonus should be paid, officials should consider the following factors:
      (1) The success of recent efforts to recruit candidates for similar positions, including a review of indicators such as declination and acceptance rates, and the length of time required to fill similar positions;

      (2) Recent turnover in similar positions;

      (3) Labor-market factors that may affect the ability of the agency to recruit candidates for similar positions now or in the future;

      (4) Special qualifications needed in the position; and

      (5) The practicality of using the superior qualifications appointment authority provided by 5 U.S.C. 5333 and 5 CFR 531.203(b) alone or in combination with a recruitment bonus.

    5. Group coverage. FHWA may target groups of positions that have been difficult to fill in the past or that may be difficult to fill in the future and may make the required written determination to offer a recruitment bonus on a group basis. All requirements must be met in order to pay a recruitment bonus to an individual employee in a designated group. For example, FHWA may authorize a recruitment bonus of up to 25 percent of basic pay, and the employee must be newly appointed in the Federal Government and must sign a service agreement of at least 6 months.

    6. Payment. A recruitment bonus must be calculated as a percentage of the employee's starting annual rate of basic pay (excludes locality pay, but includes special rates) at the time of appointment, not to exceed 25 percent. The bonus is paid in a lump sum.

      (1) A bonus may be paid to an individual not yet employed who has received a written offer of employment and signed a written service agreement.

      (2) A recruitment bonus is not considered part of an employee's rate of basic pay for any purpose.

      (3) Payment of the bonus and the service period generally would begin when the employment in the new position begins, but the effective date could be delayed in accordance with OPM regulations, such as when the new position includes a period of formal training.

      (4) A recruitment bonus may be paid to a newly appointed employee whose pay has been set above the minimum step in accordance with superior qualifications appointment authority as allowed by 5 U.S.C. 5333.

    7. Bonus amount criteria. For assistance in determining the appropriate amount for a particular bonus, refer to the guidance in Attachment 2, Bonus Amount Criteria.

    8. Approval level. An agency official who is at a higher level than the official who recommended the bonus must approve a recruitment bonus. Within FHWA, Core Business Unit Program Managers, Service Business Unit Directors, and Directors of Field Services may approve recruitment bonuses within established ranges for subordinate positions. The Administrator (or his/her designee) retains approval authority for all other positions. In situations where a recommended bonus exceeds a recommended amount, the Administrator's approval is required.

    9. Repayment. If an employee fails to complete the agreed-upon service period, the employee must repay the portion of the bonus attributable to the uncompleted period. Exception: No repayment is required when the employee is involuntarily separated (for reasons other than misconduct or delinquency).

  7. What is a relocation bonus and when is it authorized? A relocation bonus is a lump-sum payment of up to 25 percent of basic pay that an agency may pay to a current Federal employee who is relocating to a difficult-to-fill position in a different commuting area.

    1. Covered positions. Relocation bonuses may be paid to eligible employees who are serving in a GS position or in another type of position for which such payments have been approved by OPM. By regulation, OPM has approved coverage of certain positions, including SL/ST, SES, and Executive Schedule positions (except agency heads). OPM approves other categories upon written request from the head of the employing agency.

    2. Employee coverage. Only current Federal employees (from within FHWA or from a different Federal agency) serving in covered positions may receive a relocation bonus. Newly appointed employees are not eligible.

    3. Temporary appointments. A relocation bonus may be paid to an employee who is appointed without a break in service to a position in a different commuting area or whose duty station has changed permanently or temporarily to a different commuting area, assuming all other conditions are met.

    4. Service agreement. Before receiving a relocation bonus, an employee must sign a written agreement to complete a specified period of employment with FHWA in the agreed upon location. The recommending official may determine the length of the service period.

    5. Criteria for approval. Before the employee enters on duty in the position to which relocated, FHWA must determine in writing that, in the absence of the bonus, it would have a difficult time filling the position. In determining whether a bonus should be paid, officials should consider the following factors:

      (1) The success of recent efforts to recruit candidates for similar positions, including a review of indicators such as declination and acceptance rates, and the length of time required to fill similar positions;

      (2) Recent turnover in similar positions;

      (3) Labor-market factors that may affect the ability of the agency to recruit candidates for similar positions now or in the future;

      (4) Special qualifications needed in the position; and

      (5) The practicality of using the superior qualifications appointment authority provided by 5 U.S.C. 5333 and 5 CFR 531.203(b) alone or in combination with a location bonus.

    6. Case-by-case determinations. FHWA determinations to pay a relocation bonus normally must be made on a case-by-case basis. However, it may be appropriate to identify groups of positions that have been difficult to fill in the past or that may be difficult to fill in the future and to use a group-targeted approach in identifying candidates for bonuses.

    7. Group coverage. Under certain conditions, FHWA may waive the case-by-case approval requirement for employees with a rating of at least "Meets or Exceeds Requirements" (or the equivalent)-- for example, when these employees are part of a major organizational unit that is being relocated to a different commuting area. (Note: these groups must be approved using the same criteria that apply to individuals).

    8. Payment. A relocation bonus must be calculated as a percentage of the initial annual rate of basic pay (excluding locality pay) for the employee's new position, not to exceed 25 percent. The bonus is paid in a lump sum. The agency may not pay the relocation bonus until the employee establishes a residence in the new commuting area. An agency may pay relocation bonuses to employees receiving a special rate or retained rate. By law, agencies must compute a relocation bonus as a percentage of an employee's annual rate of basic pay. Special rates and retained rates are considered basic pay for this purpose.

      (1) Basic pay. A relocation bonus is not considered part of an employee's rate of basic pay for any purpose.

      (2) Relocation bonuses and relocation expenses. Relocation bonuses have no effect on an employee's entitlement to reimbursement for relocation expenses under GSA's Federal Travel Regulations and should not be paid in lieu of reimbursing the employee for such expenses.

      (3) Relocation bonus and retention bonus. A relocation bonus may be paid to an employee who is already receiving a retention bonus. (See 5 CFR 575.304 (a).).

    9. Approval level. An official of the agency who is at a higher level than the official who recommended the bonus must approve a relocation bonus. Within FHWA, Core Business Unit Program Managers, Service Business Unit Directors, and Directors of Field Services may approve relocation bonuses within established ranges for subordinate positions. The Administrator (or his/her designee) retains approval authority for all other positions. In situations where a recommended bonus exceeds a recommended amount, the Administrator's approval is required.

    10. Repayment. If an employee fails to complete the agreed-upon service period, the employee must repay the portion of the relocation bonus attributable to the period of service that is not completed. Exception: No repayment is required when the employee is involuntarily separated (for reasons other than misconduct or delinquency) or if the employee is involuntarily relocated to a different commuting area.

  8. What is a retention bonus and under what conditions is it authorized? A retention bonus is a continuing payment (i.e., biweekly) of up to 25 percent of basic pay that an agency may pay to help retain an employee. The agency must determine that the unusually high or unique qualifications of the employee or a special need of the agency for the employee's services makes it essential to retain the employee, and the employee would be likely to leave the Federal Government in the absence of a retention bonus.

    1. Position coverage. A retention bonus may be paid to a current Federal employee holding a GS position or another type of position for which such payments have been approved by OPM. By regulation, OPM has approved coverage of certain positions, including SL/ST, SES, and Executive Schedule positions (except agency heads). OPM approves other categories upon written request from the head of the employing agency.

    2. Criteria for approval. Before paying a retention bonus, FHWA must determine that the unusually high or unique qualifications of the employee or a special need for the employee's services makes it essential to retain the employee, and the employee would be likely to leave the Federal service (for any purpose) in absence of the retention bonus. FHWA must document the basis for this determination in writing. It must address the extent to which the employee's departure would affect the agency's ability to carry out an activity or perform a function that is essential to the agency's mission. It should also address the difficulty of recent efforts to recruit candidates with similar qualifications and the availability of candidates in the labor market, as applicable.

    3. Group coverage. FHWA may pay a retention bonus of up to 10 percent of basic pay (or up to 25 percent with OPM approval) to a group or category of employees. It must determine that the employees have unusually high or unique qualifications, or that it has a special need for the employees' services that makes it essential to retain the employees in that category. The agency must also determine whether it is reasonable to presume that there is a high risk that a significant number of employees in the targeted group are likely to leave Federal service in the absence of a bonus. This determination may be based on evidence of extreme labor market conditions, high demand in the private sector for the knowledge and skills possessed by the employees, significant disparities between Federal and non-Federal salaries, or other similar conditions. All requirements in the regulations must be met to pay a retention bonus to an individual employee in a covered group. For example, FHWA may not pay a retention bonus to an employee in the covered group who is fulfilling a recruitment or relocation bonus service agreement.

    4. Payment.

      (1) A retention bonus is calculated as a percentage of the employee's rate of basic pay (excluding any locality payment), not to exceed 25 percent. It is paid at the same time as the employee's regular paycheck (usually biweekly).

      (2) An agency may not begin paying a retention bonus during the service period established by an employee's recruitment or relocation bonus service agreement. (However, a relocation bonus may be paid to an employee already receiving a retention bonus).

      (3) A retention bonus may continue for as long as the conditions giving rise to the original determination to pay the bonus still exist. A retention bonus may be reduced or terminated when it is determined that:

      (a) A lesser amount (or none at all) would be sufficient to retain the employee;

      (b) Labor market factors have changed so that it is easier to recruit for people with qualifications similar to those of the employee. Subsequently, FHWA's need for the employee's services is reduced or no longer exist; or

      (c) Budgetary considerations make it impossible to continue retention bonus payments.

      (4) A retention bonus may be paid to an employee who is likely to leave because of retirement.

      (5) A retention bonus may be paid to employees receiving a special rate or retained rate. Agencies must compute a retention bonus as a percentage of an employee's rate of basic pay. Special rates and retained rates are considered basic pay for this purpose.

      (6) A retention bonus may not be offered to an individual before the individual's employment with the agency. For example, a retention bonus cannot be offered to a person as a means of recruiting that person from another agency.

    5. Annual review. FHWA must review each retention bonus authorization at least annually to determine whether payment is still warranted. The responsible official must certify this annual determination in writing. Officials should also review the appropriateness of a retention bonus payment whenever the conditions that originally prompted the payment of the bonus change significantly. For example, a significant increase in an employee's rate of basic pay as a result of a promotion may make it unlikely that the employee would opt to leave Federal service if the bonus were cut. Similarly, if an employee completes work on a special project, there may no longer be a justification for continuing to pay a retention bonus to that employee.

    6. Approval level. Within FHWA, retention bonuses must be approved at the Administrator's level.

    7. Reduction or termination of a retention bonus. See paragraph 8.d.(3) above.

    8. Basic pay. A retention bonus is not considered part of an employee's rate of basic pay for any purpose, including severance pay, retirement, or for lump-sum annual leave payments.

    9. Aggregate pay limitation. FHWA may not authorize or continue a retention bonus if the bonus would cause the employee's projected aggregate compensation in a calendar year to exceed the rate for level one of the Executive Schedule. FHWA must reduce or terminate a retention bonus before deferring any other type of payment under the deferral provision in the aggregate pay limitation regulations.

  9. What is the approval process for bonus nominations?

    1. Unit Managers initiate the process by nominating employees, or job applicants, for bonus eligibility approval.

    2. The servicing human resources office reviews nominations to ensure that all regulatory and procedural requirements are met, and recommends approval or disapproval of the nomination and bonus amount. (This review becomes part of the nomination package).

    3. The approving official approves, adjusts, or denies all or part of the request from the nominating office.

    4. The servicing human resources office and the approving official coordinate with the Headquarters Office of Human Resources (OHR) to ensure that funds are available for the bonus and that appropriate documentation of the personnel action to initiate payment of the bonus is effected. Unusual cases requiring clarification of the bonus amount criteria or the approval process may be referred to the Director, OHR for further guidance.

  10. What are the reporting requirements? A copy of all background information related to bonus nominations is maintained by the servicing human resources office. When requested by the DOT Office of the Secretary (OST), the Headquarters OHR Services Group submits a report to OST on the use of bonus provisions.

  11. What type of documentation is required? The servicing human resources office should keep a written record of each nomination made under the above criteria, including the information listed below. See Attachment 3, Bonus Summary Chart for a summary of information required for each type of bonus.

    1. A copy of the employee's classified position description with position number, title, series, grade, duty location;

    2. A justification documenting how the employee meets the applicable criteria for a bonus;

    3. The resume or application for Federal Employment (SF-171 or OF-612) of the employee;

    4. The percentage of the employee's rate of basic pay that is recommended for the bonus;

    5. A copy of the service agreement, if required; and

    6. Bonus nominations should be reviewed periodically to assure proper application of the delegated authority and to decide whether or not the bonus is still needed.

Michael J. Vecchietti - signature
Michael J. Vecchietti
Director of Administration