[Federal Register: December 14, 2007 (Volume 72, Number 240)]
[Notices]
[Page 71168-71176]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de07-78]
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OFFICE OF PERSONNEL MANAGEMENT
Proposed Personnel Demonstration Project; Performance-Based Pay
Adjustments in the U.S. Department of Education/Federal Student Aid
AGENCY: U.S. Office of Personnel Management.
ACTION: Notice of a proposed demonstration project plan.
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SUMMARY: Chapter 47 of title 5, United States Code, authorizes the U.S.
Office of Personnel Management (OPM), directly or in agreement with one
or more agencies, to conduct demonstration projects that experiment
with new and different human resources management concepts to determine
[[Page 71169]]
whether changes in human resources policy or procedures would result in
improved Federal human resources management. The U.S. Department of
Education/Federal Student Aid and OPM propose to test a performance-
based pay system within open pay ranges linked to the corresponding
minimum and maximum rates for the grades of the General Schedule pay
structure. Section 4703 of title 5 requires OPM to publish the proposed
project plan in the Federal Register. This notice fulfills that
requirement.
DATES: Written comments must be submitted on or before January 14,
2008. A public hearing will be held on the proposed project plan on
Tuesday, January 22, 2008, at the U.S. Department of Education/Federal
Student Aid, 830 First Street, NE., Washington, DC, beginning at 10
a.m. (Eastern Time).
At the time of the hearing, interested persons or organizations may
present their written or oral comments on the proposed demonstration
project. The hearing will be informal. However, anyone wishing to
testify should contact the person listed under FOR FURTHER INFORMATION
CONTACT, so that the U.S. Department of Education/Federal Student Aid
and OPM can plan the hearing and provide sufficient time for all
interested persons and organizations to be heard. Priority will be
given to those on the schedule, with others speaking in any remaining
available time. Each speaker's presentation will be limited to ten
minutes. Written comments may be submitted to supplement oral testimony
during the public comment period.
ADDRESSES: Comments may be mailed to Demonstration Projects, U.S.
Office of Personnel Management, 1900 E Street, NW., Room 7456,
Washington, DC 20415 or submitted by e-mail to Demoprojects@opm.gov.
FOR FURTHER INFORMATION CONTACT: (1) U.S. Department of Education/
Federal Student Aid: Monica Woods, Human Resources and Workforce
Services, (202) 377-3008; (2) U.S. Office of Personnel Management:
Patsy Stevens, Systems Innovation Group Manager, (202) 606-1574, U.S.
Office of Personnel Management, 1900 E Street, NW., Room 7456,
Washington, DC 20415.
SUPPLEMENTARY INFORMATION: The goal of this demonstration project is to
make employees' pay increases more performance-sensitive, so that only
employees whose performance is Successful or better will receive any
pay adjustments and the best performers will receive the largest pay
adjustments.
Linda M. Springer,
Director.
Table of Contents
I. Executive Summary
II. Introduction
A. Purpose
B. Problems With the Present System
C. Changes Required/Expected Benefits
D. Participating Organizations
E. Participating Employees
F. Project Design
III. Personnel System Changes
A. Performance Appraisal
1. Program Requirements
2. Supervisory Accountability
3. Reconsideration of Ratings
B. Open-Range Pay System
1. Elimination of Fixed Steps
2. Rate Range
3. Pay Administration
C. Performance-Based Pay Adjustments
1. Pay Pools
2. Performance Shares
3. Pay Adjustments
4. Employees Who Do Not Receive a Pay Adjustment
5. Locality Pay and Special Rate Supplement
IV. Training
V. Conversion
A. Conversion to the Demonstration Project
B. Conversion Back to the Former System
VI. Project Modification
VII. Project Duration
VIII. Project Evaluation
IX. Costs
A. Buy-In Costs
B. Recurring Costs
X. Waiver of Laws and Regulations Required
A. Title 5, United States Code
B. Title 5, Code of Federal Regulations
I. Executive Summary
This project was designed by the U.S. Department of Education/
Federal Student Aid in consultation with OPM. The demonstration project
will modify the General Schedule pay system by eliminating fixed steps
within each grade and providing for annual pay adjustments based on
performance. The proposed project will test the application of
meaningful distinctions in levels of performance to the allocation of
annual pay increases under the General Schedule.
II. Introduction
A. Purpose
The purpose of the proposed project is to modify the General
Schedule (GS) pay system to provide larger annual pay increases to
employees who are better performers based on performance distinctions
made under a credible, strategically-aligned performance appraisal
program and thereby improve the results-oriented performance culture
within the organization.
B. Problems With the Present System
The current GS pay system provides annual pay increases to all
employees, even those whose performance is less than Successful.
Similarly, periodic within-grade pay increases are virtually automatic.
Although an employee's performance must be determined to be at an
``acceptable level of competence'' in order for the employee to receive
a within-grade increase (WGI), this is only a single-level threshold
and no further distinctions in levels of performance play a role. All
performance levels above the threshold are treated the same for
purposes of determining the amount of the increase and the rate at
which an employee advances through the rate range of his or her grade.
The U.S. Department of Education/Federal Student Aid and OPM do not
believe it is a wise use of the limited resources available for the
compensation of Federal employees--nor does it serve taxpayers
effectively or treat employees fairly--to pass on the same pay
adjustments, year after year, to all employees regardless of
differences in their performance.
The current GS pay system does provide one limited tool to address
distinctions in levels of performance--namely, quality step increases
(QSIs). QSIs are discretionary adjustments that are not integrated into
the normal pay adjustment process; thus, limited funds are available to
provide QSIs, and the decision-making process may not be very
transparent. In addition, there is no flexibility as to the amount of
the QSI; a full step increase is required. Also, QSIs may be used only
for those with the highest rating of record. In summary, QSIs alone
cannot be relied upon to establish an effective link between pay and
performance based on meaningful distinctions among different levels of
performance.
Under these constraints of the GS pay system, agencies are severely
limited in their ability to establish a results-oriented performance
culture as contemplated under the Human Capital Assessment and
Accountability Framework (HCAAF). Within the HCAAF, a results-oriented
performance culture effectively plans, monitors, develops, rates, and
rewards employee performance, consistent with the merit system
principle that ``appropriate incentives and recognition should be
provided for excellence in performance'' (5 U.S.C. 2301(b)(3)).
C. Changes Required/Expected Benefits
The proposed demonstration project responds to the problem
identified above by eliminating the 10 fixed steps
[[Page 71170]]
within each of the 15 GS grades and by making annual GS pay adjustments
performance-sensitive. Pay adjustments will be funded from a pay pool
consisting of the amounts that would otherwise be used to pay the
annual GS pay adjustment, WGIs, and QSIs to employees covered by the
demonstration project. A share mechanism will be used to allocate pay
increases among employees with different levels of performance, and
managers will be expected to provide fair and equitable performance
ratings. Implementation of the proposed pay system will result in
larger pay increases going to employees who demonstrate higher
performance. By regularly rewarding better performance with better pay,
participating organizations will strengthen their results-oriented
performance cultures. Among other things, they will be better able to
retain their good performers and recruit new ones.
D. Participating Organizations
The demonstration project will be conducted within the U.S.
Department of Education/Federal Student Aid, which is committed to
operating a credible, robust performance appraisal program aligned to
the organization's strategic goals and objectives, and has demonstrated
a commitment to providing the training and resources that will be
needed to make its performance management program highly effective and
credible.
E. Participating Employees
The demonstration project will cover all GS rating officials in the
Federal Student Aid organization. Table 1 shows the number of employees
to be covered by the project by occupational series and grade.
Table 1.--Covered Employees, by Occupational Series and Grade
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GS grade
OCC series --------------------------------------------------------------------------------------------------------- Total
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
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201................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1
301................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1
303................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
340................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 3
343................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 17 32 49
501................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 2
510................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 6
560................................... 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1
1101.................................. 0 0 0 0 0 0 0 0 0 0 0 0 1 26 2 29
1102.................................. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1
1160.................................. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1
2210.................................. 0 0 0 0 0 0 0 0 0 0 0 0 0 5 6 11
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Total............................. ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 105
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Management has provided initial notice to affected employees and will
continue consultation throughout project implementation.
F. Project Design
The project has been designed simply to ensure that no
participating employee with a rating of record of less than Successful
will receive a pay increase and that funds available for pay
adjustments will be allocated on the basis of performance.
III. Personnel System Changes
A. Performance Appraisal
U.S. Department of Education/Federal Student Aid recognizes the
importance of maintaining a highly credible performance management
program. The U.S. Department of Education/Federal Student Aid will use
a performance management program under the Department of Education
appraisal system that has been approved by OPM consistent with chapter
43 of title 5, United States Code. Throughout the duration of the
demonstration project, the effectiveness of performance management
within the project will be monitored by examining metrics and
assessments that OPM and agencies generally apply to performance
management and programs.
1. Program Requirements
The U.S. Department of Education/Federal Student Aid performance
appraisal program requires written performance plans for each covered
employee containing the employee's performance elements and standards.
The performance plan links the performance elements and standards for
individual employees to the organization's strategic goals and
objectives. Ongoing feedback and dialogue between employees and their
supervisors regarding performance is required. In addition, the program
provides for, at a minimum, one mid-year progress review.
The appraisal program, including its performance levels and
standards, provides for making meaningful distinctions in performance.
Its summary level pattern under 5 CFR 430.208(d) uses Levels 1, 2, 3,
4, and 5, which the U.S. Department of Education/Federal Student Aid
has labeled Unacceptable, Minimally Successful, Successful, Highly
Successful, and Outstanding, respectively. Employees must be covered by
the appraisal program for at least 120 days before they can be assigned
a performance rating. Supervisors and managers apply the program to
make appropriate differentiations in performance, as shown through
ratings distributions, that reflect overall organizational performance.
Employees receive a written performance appraisal (i.e., a rating of
record) annually. Forced distribution of ratings is prohibited. Each
annual appraisal period will begin on October 1 and end on the
following September 30. New employees on a 120-day performance plan
that extends beyond the official appraisal period end date, but ends on
or before December 31, will receive a rating of record at the
conclusion of that performance plan's cycle, and will receive a
prorated pay adjustment in accordance with section III.C. Performance
appraisals will be completed in a timely manner to support pay
decisions in accordance with section III.C.
Additional guidance on the U.S. Department of Education/Federal
Student Aid performance appraisal
[[Page 71171]]
program will be provided through internal policies and operating
directives. Performance appraisal is an evolutionary process, and
changes may be made during the course of the demonstration project
based on findings from our ongoing evaluations and reviews. Any changes
will be communicated to affected employees prior to the U.S. Department
of Education/Federal Student Aid's implementing the changes.
2. Supervisory Accountability
Supervisors are responsible for recognizing exceptional performance
and providing appropriate consequences for employee performance by
addressing poor performance. The performance expectations for
supervisors and managers include the degree to which supervisors and
managers plan, assess, monitor, develop, correct, rate, and reward
subordinate employees' performance. To effectively meet these
performance expectations, supervisors must articulate clear job
requirements and performance expectations, provide regular performance
feedback, and support employee development through training
opportunities, coaching, mentoring, and individual performance plans.
It is recognized that specific training will be provided to prepare
supervisors and managers to exercise these responsibilities.
3. Reconsideration of Ratings
To support fairness and transparency for the program and its
consequences, employees have an opportunity to request reconsideration
of a rating of record by a management official other than the rating
official. Such reconsiderations must be in writing and initiated no
more than 15 days after the official rating of record has been given to
the employee. The management official must provide a decision on
whether to adjust the official rating of record in accordance with the
timeframes provided through internal policies and operating directives
on administrative grievances. If the reconsideration of the appraisal
results in a different rating of record, the revised rating of record
will become the basis for the employee's pay adjustment(s) in
accordance with section III.C. If the adjustment occurs after all pay
deliberations have been finalized, it does not result in a
recalculation of other employees' pay adjustments.
B. Open-Range Pay System
Employees will continue to be covered by the 15-grade GS position
classification system established under 5 U.S.C. chapter 51; however,
the GS pay system established under 5 U.S.C. chapter 53, subchapter
III, will be modified as described in the following sections. Except as
otherwise provided in this plan, demonstration project employees will
be considered to be GS employees in applying other laws, regulations,
and policies.
1. Elimination of Fixed Steps
The ten fixed steps of each GS grade will not apply to employees
participating in the demonstration project. The fixed-step system was
designed to reward longevity. An open-range pay system is an important
element of any effort to make pay more performance-sensitive. No
employee's pay will be reduced as a result of becoming covered by the
demonstration project. However, demonstration project employees will no
longer receive longevity-based, performance-insensitive within-grade
pay increases at prescribed intervals. Instead, they will be granted
annual performance adjustments as described in section III.C below.
2. Rate Range
The normal minimum and maximum rates of the rate range for each
grade will equal the applicable step 1 rate and step 10 rate,
respectively, in the General Schedule.
For employees with a rating of record below Successful, the minimum
rate of the range is extended 5 percent below the normal minimum. An
employee's rate may fall below the normal range minimum when that
minimum increases as a result of a rate range adjustment and the
employee cannot receive a pay adjustment because the employee's rating
of record is below Successful, as described in section III.C.4.
The U.S. Department of Education/Federal Student Aid may, at its
discretion, extend the maximum rate of each range by five percent above
the normal maximum for employees with a summary rating level at the
highest level (Outstanding). Before implementing this feature, the U.S.
Department of Education/Federal Student Aid must notify demonstration
project employees in writing. This upper range extension is designed to
help ensure that the range of available pay rates will be adequate to
recognize truly outstanding performance. If an employee within this
range extension receives a rating below the highest level, the
employee's rate may not be increased except as necessary to prevent the
rate from falling below the normal range maximum due to a rate range
adjustment.
In addition to rates of basic pay within the rate range, employees
may receive locality payments or special rate supplements as described
in the next section.
3. Pay Administration
Performance-based pay adjustments described in section III.C will
be made to the rate of basic pay. These adjustments are scheduled to be
made on the same date that annual rate range adjustments normally take
effect--i.e., the first day of the first pay period beginning on or
after January 1.
Locality-based comparability payments under 5 U.S.C. 5304 and
special rate supplements under 5 U.S.C. 5305, as applicable, will be
paid on top of the rate of basic pay in the same manner as those
payments apply to other GS employees, except as otherwise provided in
this section. If the U.S. Department of Education/Federal Student Aid
extends the maximum rate of each range by 5 percent above the normal
maximum for Outstanding performers, an adjusted rate cap 5 percent
higher than the normal EX-IV cap may be established to accommodate
those Outstanding performers. This higher cap will apply only to
employees with an Outstanding rating of record whose pay rate is in the
upper range extension.
If the locality rate for an employee at the normal grade maximum is
affected by the EX-IV cap, resulting in an ``effective locality pay
percentage'' that is less than the regular locality pay percentage, the
locality rate for an employee in the upper rate range extension of the
same grade will be computed using that same effective locality pay
percentage. For example, if the regular locality pay percentage is 30
percent, but the EX-IV cap causes the amount of locality pay actually
received by an employee at the normal grade maximum to be 20 percent,
that effective locality pay percentage of 20 percent would be used to
compute locality pay for an employee in the upper range extension of
the same grade. Similarly, if the special rate supplement-adjusted rate
for an employee at the normal grade maximum is affected by the EX-IV
cap, resulting in an ``effective special rate supplement percentage''
that is less than the regular special rate supplement percentage, the
adjusted rate for an employee in the upper rate range extension of the
same grade will be computed using that same effective special rate
supplement percentage.
[[Page 71172]]
Subject to guidance provided by OPM, the U.S. Department of
Education/Federal Student Aid will establish pay administration rules
for determining an employee's rate of pay upon initial appointment,
promotion, demotion, transfer, reassignment, or other position change.
In addressing geographic conversions and simultaneous pay actions, such
rules must be consistent with 5 CFR 531.205 and 5 CFR 531.206,
respectively.
Upon promotion, an employee is entitled to an increase of 8
percent, or a higher increase as necessary to set the employee's rate
at the minimum of the range for the higher grade. U.S. Department of
Education/Federal Student Aid may establish exceptions to this policy
to deal with employees receiving a retained rate, employees who are re-
promoted shortly after a demotion, employees with exceptional
performance warranting a larger increase with higher management
approval, etc.
The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536
apply to demonstration project employees. The pay retention rules in 5
U.S.C. 5363 and 5 CFR part 536 apply to demonstration project
employees, subject to exceptions described in this section. One
exception is that an employee with a rating of record below Successful
may not receive an increase in his or her retained rate under 5 U.S.C.
5363(b)(2)(B). For such an employee, the retained rate is frozen and
not subject to adjustment. When such an employee's retained rate falls
below the applicable adjusted rate for the grade maximum, the
employee's retained rate will be terminated, and the employee's pay
will be set at an adjusted rate equal to the retained rate (i.e., the
rate is not set at the range maximum).
If the U.S. Department of Education/Federal Student Aid extends the
maximum rate of each range by 5 percent above the normal maximum for
Outstanding employees and establishes a locality and special rate cap 5
percent higher than the normal EX-IV cap, the following special rules
would apply:
(1) The cap on retained rates will be equal to the rate for level
IV of the Executive Schedule plus 5 percent (instead of the EX-IV cap
established under 5 CFR 536.306) in order to accommodate the upper
range extension.
(2) An employee in the upper range extension who is rated below
Outstanding will be converted to a retained rate before processing any
other pay action.
(3) The range maximum rate used in computing retained rate
adjustments will always be the applicable adjusted rate for the normal
range maximum (including any applicability locality payment or special
rate supplement), not the upper range extension maximum, regardless of
the employee's rating of record.
(4) If an employee is receiving a retained rate that is less than
the applicable adjusted maximum rate (including any applicable locality
payment or special rate supplement) for the upper range extension for
the employee's grade, and if that employee receives a rating of record
of Outstanding, the employee's retained rate will be terminated and
converted to an equal adjusted rate (base rate in upper range extension
plus applicable locality payment or special rate supplement). This
conversion must be processed before any other pay adjustment.
(5) For a retained rate employee with a rating of record of
Outstanding, if a retained rate adjustment provided at the time of a
range adjustment results in the retained rate falling below the
applicable adjusted rate for the upper range extension maximum, the
employee's retained rate will be terminated, and the employee's pay
will be set at the maximum rate of the upper range extension.
(6) For a retained rate employee with a rating of record of
Successful or Highly Successful, if a retained rate increase provided
at the time of a range adjustment results in the retained rate falling
below the applicable adjusted rate for the normal grade maximum, the
employee's retained rate will be terminated, and the employee's pay
will be set at the normal grade maximum rate.
As required by 5 CFR 536.304(a)(2) and 536.305(a)(2), any general
pay adjustment, including a retained rate adjustment as described in
the preceding paragraphs, must be processed before any other
simultaneous pay action (such as a geographic pay conversion).
When applicable, the saved pay rules in 5 U.S.C. 3594 and 5 CFR
359.705 for former members of the Senior Executive Service continue to
apply to demonstration project employees, except that (1) an employee
with a rating of record below Successful may not receive an increase in
his or her saved rate under 5 U.S.C. 3594(c)(2); and (2) the 50-percent
adjustment rule must be applied in the same manner as it is applied for
a retained rate under 5 U.S.C. 5363, subject to the modifications
described in the preceding paragraphs. The rules regarding termination
of a saved rate when it falls below the applicable adjusted maximum
rate must be parallel to those governing termination of a retained rate
under 5 U.S.C. 5363, subject to the modifications described in the
preceding paragraphs.
An employee's rate of basic pay may not exceed the normal maximum
rate for the employee's grade unless the employee is receiving a
retained rate under 5 U.S.C. 5363, a saved rate under 5 U.S.C. 3594, or
is entitled to a rate within the upper range extension for employees
with an Outstanding rating of record as provided under section III.B.2.
An employee's rate of basic pay may not be below the normal minimum
rate for the employee's grade unless the employee's most recent rating
of record is below Successful.
C. Performance-based Pay Adjustments
1. Pay Pools
Participating employees whose most recent rating of record is below
Successful will not receive the annual GS pay adjustment. Funds that
otherwise would be spent on the across-the-board GS pay adjustment,
WGIs, and QSIs for demonstration project employees will instead be
placed into a pay pool, which will be used to fund annual performance-
based pay increases for those employees whose rating of record is
Successful or higher. If in any given year there is not an across-the-
board GS pay increase, the pay pool used to fund the performance-based
pay adjustments will consist only of those funds that otherwise would
be used for WGIs and QSIs. A share mechanism will be used (1) to ensure
that employees with higher ratings of record receive greater pay
increases than employees with relatively lower ratings and (2) to
control costs without resorting to a forced distribution of ratings.
Each employee will be assigned a certain number of shares, based on his
or her rating of record in accordance with section III.C.2. All
employees in the normal rate range whose rating of record is at least
Successful will receive an adjustment equal to at least the amount of
the annual GS base pay comparability increase under 5 U.S.C. 5303.
The U.S. Department of Education/Federal Student Aid will determine
which participating employees are covered by any pay pool and determine
the dollar value of each pay pool. In setting the value of pay pools,
the U.S. Department of Education/Federal Student Aid will allocate an
amount for performance pay increases at least equal to the estimated
value of the WGIs, QSIs, and annual GS pay adjustments that otherwise
would have been paid to participating employees. In computing
[[Page 71173]]
the estimated value of WGIs and QSIs, the U.S. Department of Education/
Federal Student Aid may use estimated Governmentwide averages, as
computed by OPM.
2. Performance Shares
The U.S. Department of Education/Federal Student Aid will establish
rating/share patterns for the pay pool--that is, the relationship
between a rating of record and a single number of shares. Initially,
the U.S. Department of Education/Federal Student Aid will use an
approach under which the number of shares assigned to an employee with
a Successful or higher rating of record will equal that employee's
numerical performance score, which may range from 3.00 to 5.00.
(Currently, performance scores are computed to the second decimal
place.) Employees with a rating of record below Successful (performance
score less than 3.00) will be assigned 0 shares. No shares may be
assigned to an employee with a rating of record below Successful, since
no pay increase is payable to employees with such a rating of record.
The U.S. Department of Education/Federal Student Aid may revise the
rating/share pattern for employees with a Successful or higher rating
of record in coordination with OPM and after giving affected employees
advance notice. Employees will be informed in writing at least 180 days
before the end of the appraisal period of any decision by the U.S.
Department of Education/Federal Student Aid to change the rating/share
pattern.
After the rating of record and shares are assigned to all
employees, the value of a single share can be calculated.
3. Pay Adjustments
In general: The U.S. Department of Education/Federal Student Aid
will determine an employee's performance payout by first multiplying
the employee's rate of basic pay by the number of assigned shares, and
then multiplying the result of that calculation by the determined value
of a performance share. The performance share value, expressed as a
percentage, will be an allocated portion of the pay pool funds based on
the employee's performance rating. On the first day of the first pay
period beginning on or after January 1 of each year, this amount must
be paid as an increase in the employee's rate of basic pay, but only to
the extent that it does not cause the employee's rate to exceed the
applicable maximum of the employee's rate range. Notwithstanding the
preceding sentence, employees in the upper range extension rated below
the highest level are subject to special rules as described in section
III.B.2 and III.B.3. At the discretion of the Secretary or the
Secretary's designee, any portion of the employee's performance pay
increase amount not delivered as a basic pay increase may be paid out
as a lump sum (with no charge to the pay pool). Such a lump-sum payment
is not basic pay for any purpose and is not a cash award under chapter
45 of title 5, United States Code. Special rules apply to retained rate
employees as described later in this section.
In no case may an employee with a rating of record of Successful or
higher receive a performance payout that is less than the percentage
value of any simultaneous base rate range adjustment, except for
employees receiving a retained rate and employees receiving a rate in a
upper range extension with a rating of record of Successful or Highly
Successful, as provided in section III.B.2. This guaranteed amount will
be used in place of any lower performance payout resulting from the
share methodology. Any additional costs of using the guaranteed amount
will be funded outside the pay pool. Otherwise, the guaranteed amount
is applied in the same manner as the regular performance payout.
An employee who does not have a rating of record for the appraisal
period most recently completed will be treated the same as employees in
the pay pool who received the modal rating for that period.
The U.S. Department of Education/Federal Student Aid may establish
policies on prorating the performance pay increases and/or lump-sum
payments for an employee who, during the period between annual pay
adjustments, was (1) hired or promoted, (2) in leave-without-pay
status, (3) on a part-time work schedule, or (4) in other circumstances
that make proration appropriate. Such proration policies will provide
each affected employee with the full percentage adjustment used to
adjust base rate ranges (if any) and will prorate any additional amount
of performance pay increase that would be applicable to the employee
but for the proration requirement. Such proration policies may
establish a minimum employment period as a condition to receive any
amount of a performance pay increase.
If an employee's rating of record that is the basis for a
performance payout is retroactively revised through a reconsideration
or grievance process, the employee's performance payout must be
retroactively recomputed using the share value as originally
determined. Any such retroactive corrections are not funded out of the
pay pool and do not affect the performance payouts provided to other
employees in the pay pool. In setting the size of a future pay pool,
management will take into account past and projected corrections.
Special provisions for employees returning to duty after a period
of service in the uniformed services or in receipt of workers'
compensation benefits: Special pay-setting provisions apply to
employees who do not have a rating of record to support a pay
adjustment but who are returning to duty status after a period of leave
without pay or separation during which the employee (1) was serving in
the uniformed services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102)
with legal restoration rights (e.g., 38 U.S.C. 4316), or (2) was
receiving workers' compensation benefits under 5 U.S.C. chapter 81,
subchapter I. In these cases, the U.S. Department of Education/Federal
Student Aid will determine the employee's prospective rate of basic pay
upon return to duty by making performance pay adjustments for the
intervening period based on the modal rating of record for employees in
the pay pool. The performance pay increases during the intervening
period may not be prorated based on periods covered by this provision.
In addition, a performance pay increase that is effective after the
employee's return to duty may not be prorated based on periods covered
by this provision. A lump-sum payment for a period including actual
service performed after the employee's return to duty must be prorated
(based on service covered by this provision) under the same agency
proration policies that apply generally to periods of leave without
pay.
Special provision for employees receiving a retained rate of basic
pay: An employee receiving a retained rate under 5 U.S.C. 5363 or 5
U.S.C. 3594 is not eligible for a basic pay increase except in
conjunction with a rate range adjustment, as described in section
III.B.3. At the discretion of the Secretary or the Secretary's
designee, a retained rate employee may receive the same lump-sum
payment approved for an employee in the same pay pool who is at the
applicable range maximum and who has the same performance rating and
number of shares.
4. Employees Who Do Not Receive a Pay Adjustment
Employees with a rating of record below Successful are prohibited
from receiving a pay increase, except if necessary to prevent an
employee's rate
[[Page 71174]]
from falling more than five percent below the normal range minimum.
When an employee does not receive a pay increase because of performance
below the Successful level, his or her pay rate may fall below the
minimum rate of the grade, since that range minimum may be increasing.
However, in no case may an employee's rate of basic pay be set more
than five percent below the normal range minimum.
If the U.S. Department of Education/Federal Student Aid chooses to
give such an employee a new rating of record of Successful or higher
before the end of the current appraisal period, the employee is
entitled to an increase effective on the first day of the first pay
period beginning on or after the date the new rating is final. The
increase must be the same dollar amount as the increase the employee
would have received if he or she had been rated Successful at the time
the increase was initially denied.
Each employee who does not receive an increase in basic pay because
his or her performance is less than Successful will be entitled to be
notified promptly in writing of that fact. At the same time, the
employee must be informed in writing of the right to request that the
agency reconsider its determination, under the same procedures
prescribed by OPM regarding the determination not to provide a within-
grade increase under 5 U.S.C. 5335(c). The Merit Systems Protection
Board will process any appeals under this section in the same manner
that it processes appeals under 5 U.S.C. 5335(c).
5. Locality Pay and Special Rate Supplement
When a locality-based comparability payment established under 5
U.S.C. 5304 is increased, a demonstration project employee whose most
recent rating of record is below Successful is entitled to the
increased locality rate, but his or her underlying rate of basic pay
will be reduced in a manner that ensures the employee's total rate of
pay does not increase. This reduction is necessary to ensure, in an
administratively feasible way, that an employee rated less than
Successful will not receive a pay increase; it does not constitute a
reduction in pay for purposes of applying the adverse action procedures
in chapter 75 of title 5, United States Code. (Exception: An employee's
rate of basic pay may not be reduced under this paragraph to the extent
that the reduction would cause an employee's rate to fall more than
five percent below the normal range minimum.)
Similarly, when a special rate supplement established under 5
U.S.C. 5305 is increased, a demonstration project employee whose rating
of record is below Successful is entitled to the increased supplement,
but his or her underlying rate of basic pay will be reduced in a manner
that ensures the employee's total rate of pay does not increase.
IV. Training
Training for all involved is essential to the success of the
demonstration project. Training will be provided to affected employees
before the project is launched and throughout the life of the project.
It is important that employees perceive the performance management
program as fair and transparent; therefore, supervisors and managers
will be trained extensively in setting and communicating performance
elements and standards; monitoring performance and providing timely
feedback; developing employee performance and addressing poor
performance; rating employees' performance based on their performance
plans; and involving employees in the development and implementation of
the performance appraisal program. Supervisors and managers will be
held accountable for the effective management of the performance of
employees they supervise through performance elements set for and
appraisals made of their own performance in this regard.
All employees will be trained in the performance appraisal process
and the pay adjustment mechanism. Various types of training are being
considered, including videos, on-line tutorials, and train-the-trainer
concepts.
V. Conversion
A. Conversion to the Demonstration Project
Employees whose positions are converted to the demonstration
project will be converted with no change in their rate of basic pay.
Any simultaneous pay action that was scheduled to take effect under the
GS pay system on the date of conversion must be processed before
processing the conversion to the modified GS pay system. Immediately
after conversion, eligible employees will receive an increase in basic
pay reflecting the prorated value of the next scheduled WGI. The
prorated value is determined by calculating the portion of the time-in-
step an employee has completed toward the waiting period for their next
step increase. This additional within-grade ``buy in'' adjustment will
not be made for (1) employees who are at the step 10 rate of their
grade immediately before conversion to the demonstration project, (2)
employees who are receiving a retained rate of pay under 5 U.S.C. 5363
or a saved rate under 5 U.S.C. 3594 immediately before conversion to
the demonstration project, or (3) employees whose performance has been
determined to be below Successful. The first performance-based pay
increase under the project's pay adjustment mechanism will be effective
on the first day of the first pay period beginning on or after January
1, 2009.
For employees who enter the demonstration project by lateral
reassignment, transfer, or change in position status, the U.S.
Department of Education/Federal Student Aid may apply parallel pay
conversion rules, including rules for providing a prorated adjustment
reflecting time accrued toward a GS within-grade increase or similar
within-range adjustment under another pay system. If conversion into
the demonstration project is accompanied by a geographic move, the
employee's pay entitlements under the former pay system in the new
geographic area must be determined before the pay conversion. For
employees who enter the demonstration project after the conversion date
and receive a rating of record for a performance plan of at least 120
days, the U.S. Department of Education/Federal Student Aid will apply a
prorated pay adjustment proportionate to the time accrued under the
performance-based pay system, in accordance with section III.C.
B. Conversion Back to the Former System
If a demonstration project employee is moving to a GS position not
under the demonstration project, or if the project ends and each
project employee must be converted back to a GS position not covered by
the project, the employee's rate of basic pay under the demonstration
project as in effect immediately before conversion will be used in
applying any simultaneous pay actions under the regular GS pay system
that are effective on the date of conversion (e.g., promotion,
geographic movement). If the rate of basic pay falls between steps
after applying any simultaneous pay actions, the employee's rate will
be set at the next higher step.
If a demonstration project employee is receiving a retained rate
immediately before conversion back to the regular GS pay system, the
employee will continue to be entitled to a retained rate upon
conversion, but the retained rate thereafter will be governed by 5
U.S.C. 5363 and 5 CFR part 536 or 5 CFR 359.705, as applicable.
[[Page 71175]]
If the U.S. Department of Education/Federal Student Aid establishes
a five percent rate upper range extension for Outstanding performers
and a demonstration project employee is receiving a rate in that range
extension at the time the employee leaves the demonstration project and
converts to the regular GS pay system, that rate will be converted to a
retained rate, subject to the rules and limitations in 5 U.S.C. 5363
and 5 CFR part 536.
If a demonstration project employee is receiving a rate below the
normal GS rate range because his or her rate has fallen within the
lower range extension for less than Successful performers, that rate
must be converted to the minimum rate for the grade upon conversion to
the regular GS pay system.
VI. Project Modification
Demonstration projects require modification from time to time as
experience is gained, results are analyzed, and conclusions are reached
on how the system is working. The U.S. Department of Education/Federal
Student Aid may modify and adjust over time features and elements of
this project plan. The Department/Federal Student Aid will coordinate
such modifications with OPM and gain its approval prior to implementing
the modification. Depending on the nature and extent of the
modification, OPM may require that the modification be published as a
notice in the Federal Register.
VII. Project Duration
The initial implementation period for the demonstration project
will be 5 years. However, with OPM's concurrence, the project may be
extended for additional testing or terminated before the expiration of
the five-year period.
VIII. Project Evaluation
Chapter 47 of title 5, United States Code, requires an evaluation
of the results of the demonstration project. The U.S. Department of
Education/Federal Student Aid, in coordination with OPM, will develop a
plan to evaluate the demonstration project to determine the extent to
which the pay increases paid to participating employees reflect
meaningful distinctions among their levels of performance. Workforce
data will be analyzed to determine whether the project is achieving its
goal and whether it is resulting in any adverse impact on particular
groups of employees. Key indicators, including leadership commitment,
communication, stakeholder involvement, training, planning, mission
alignment, and the rewarding of performance, will be assessed to ensure
compliance with stated project goals. The evaluation will address the
extent to which the project has incorporated the elements required by
section 1126 of Public Law 108-136 (5 U.S.C. 4701 note). In addition,
the project will be examined during each phase of the evaluation to
assess whether costs are being managed effectively. Moreover, cost
discipline will be examined during each phase of the evaluation to
ensure spending remains within acceptable limits. Finally, employee
feedback will be sought through surveys, interviews, and focus groups
to assess employee perceptions of the fairness and integrity of the
performance appraisal and pay adjustment processes.
IX. Costs
A. Buy-in Costs
There will be added costs resulting from the within-grade increase
``buy-in'' provision described in section V; however, those costs will
be offset by the elimination of within-grade step increases that
otherwise would have occurred.
B. Recurring Costs
All funding will be provided through the organization's budget. No
additional funding will be requested specifically for this project; all
costs will be charged to available funds through existing
appropriations, including those incurred in the areas of project
development, training, and project evaluation.
X. Waiver of Laws and Regulations Required
A. Title 5, United States Code
Chapter 35, section 3594: Saved pay for former members of the
Senior Executive Service (only to the extent necessary to (1) bar
employees with a rating of record below Successful from receiving a
saved rate increase under 5 U.S.C. 3594(c)(2); and (2) apply rules
parallel to those governing adjustment and termination of retained
rates under 5 U.S.C. 5363, as modified under this plan).
Chapter 53, section 5302(1)(A), (8) and (9): Definitions (only to
the extent necessary to provide that employees under the demonstration
project are not considered to be GS employees for the purposes of
annual adjustments under section 5303 or similar provision of law
governing annual adjustments for employees covered by section 5303).
Chapter 53, section 5303: Annual adjustments to pay schedules.
Chapter 53, section 5304(g)(1): Locality-based comparability
payments (only to the extent necessary to (1) provide that if the U.S.
Department of Education/Federal Student Aid extends the maximum rate of
a rate range by 5 percent above the normal maximum for Outstanding
performers, a locality rate may not exceed the rate for EX-IV, plus 5
percent, for employees in that range extension; and (2) apply an
``effective'' locality pay percentage for employees in the upper range
extension under circumstances described in this plan.
Chapter 53, section 5305(a)(1): Special pay authority (only to the
extent necessary to (1) provide that if the U.S. Department of
Education/Federal Student Aid extends the maximum rate of a rate range
by 5 percent above the normal maximum for Outstanding performers, a
special rate may not exceed the rate for EX-IV, plus 5 percent) for
employees in that range extension; (2) to interpret the references to
the minimum and maximum rates of a grade as references to the normal
minimum and maximum rates of a grade under this plan; and (3) apply an
``effective'' special rate supplement percentage for employees in the
upper range extension under circumstances described in this plan).
Chapter 53, subchapter III: General Schedule pay rates (except
that, for purposes of applying any other laws, regulations, or policies
that refer to GS employees or to subchapter III of chapter 53 of title
5, United States Code, the modified pay system established under this
plan must be considered to be a GS pay system established under such
subchapter III; this includes, but is not limited to, references to the
General Schedule in section 5304 (relating to locality pay, except as
provided in the waiver, above), section 5545(d) (relating to hazard
pay), and sections 5753-5754 (dealing with recruitment, relocation, and
retention incentives)).
Chapter 53, section 5363: Pay retention (only to the extent
necessary to (1) bar employees with a less than Successful rating of
record from receiving retained rate increases under 5 U.S.C.
5363(b)(2)(B); (2) provide the pay (including any locality adjustment
or special rate supplement) of an employee in the upper range extension
who is rated below Outstanding will be converted to a retained rate
before processing any other actions; (3) provide a retained rate that
is less than the maximum rate (including any locality adjustment or
special rate supplement) of the upper range extension for an employee
who receives a rating of record of Outstanding will be terminated and
converted to an equal
[[Page 71176]]
adjusted rate; (4) provide the range maximum rate used to compute
retained rate adjustments is the normal range maximum rate (including
any locality adjustment or special rate supplement); and (5) provide
when a frozen retained rate for an employee with a rating of record
below Successful falls below the applicable adjusted rate for the
normal grade maximum, the retained rate will be terminated and the
employee's pay will be set at an adjusted rate equal to the retained
rate).
Chapter 75, section 7512(4): Adverse actions (only to the extent
necessary to provide that adverse actions do not apply to reductions in
rates of basic pay to offset a locality pay or special rate supplement
increase as a result of receiving a rating of record below Successful).
Note: If any of the provisions of title 5, United States Code,
listed above are amended during the period this demonstration
project is in effect, U.S. Department of Education/Federal Student
Aid may choose to terminate the waiver of one or more such
provisions with respect to employees participating in the project,
without formally modifying the project itself. U.S. Department of
Education/Federal Student Aid must notify OPM when any such waiver
is terminated.
B. Title 5, Code of Federal Regulations
Part 359, subpart G, section 359.705: saved pay for former members
of the Senior Executive Service (only to the extent necessary to (1)
bar employees with a rating of record below Successful from receiving a
saved rate increase under 5 CFR 359.705(d)(1); and (2) apply rules
parallel to those governing adjustment and termination of retained
rates under 5 U.S.C. part 536, as modified under this plan).
Part 430, subpart B, section 430.203: Definitions (only to the
extent necessary to allow an additional rating of record to support a
pay decision under sections III.C.3 or 4 of this project plan).
Part 530, section 530.304: Establishing or increasing special rates
(only to the extent necessary to (1) provide that if the U.S.
Department of Education/Federal Student Aid extends the maximum rate of
a rate range by 5 percent above the normal maximum for Outstanding
performers, a special rate may not exceed the rate for EX-IV, plus 5
percent) for employees in that range extension; (2) to interpret the
references to the minimum and maximum rates of a grade as references to
the normal minimum and maximum rates of a grade under this plan; and
(3) apply an ``effective'' special rate supplement percentage for
employees in the upper range extension under circumstances described in
this plan.
Part 531, subpart B: Determining Rate of Basic Pay.
Part 531, subpart D: Within-Grade Increases.
Part 531, subpart E: Quality Step Increases.
Part 531, section 531.604: Determining an employee's locality rate
(only to the extent necessary to apply an ``effective'' locality pay
percentage for employees in the upper range extension under
circumstances described in this plan).
Part 531, section 531.606: Maximum limits on locality rates (only
to the extent necessary to provide that if the U.S. Department of
Education/Federal Student Aid extends the maximum rate of a rate range
by 5 percent above the normal maximum for Outstanding performers, a
locality rate may not exceed the rate for EX-IV, plus 5 percent) for
employees in that range extension.
Part 536, subpart C: Pay Retention (only to the extent necessary to
(1) bar employees with a less than Successful rating of record from
receiving retained rate increases under 5 CFR 536.305; (2) provide that
if the U.S. Department of Education/Federal Student Aid extends the
maximum rate of a rate range by 5 percent above the normal maximum for
Outstanding performers, a retained rate may not exceed the rate for EX-
IV, plus 5 percent; (3) provide the pay (including any locality
adjustment or special rate supplement) of an employee in the upper
range extension who is rated below Outstanding will be converted to a
retained rate before processing any other actions; (4) provide a
retained rate that is less than the maximum rate (including any
locality adjustment or special rate supplement) of the upper range
extension for an employee who receives a rating of record of
Outstanding will be terminated and converted to an equal adjusted rate;
(5) provide the range maximum rate used to compute retained rate
adjustments is the normal range maximum rate (including any applicable
locality adjustment or special rate supplement); and (6) provide when a
frozen retained rate for an employee with a rating of record below
Successful falls below the applicable adjusted rate for the normal
grade maximum, the retained rate will be terminated and the employee's
pay will be set at an adjusted rate equal to the retained rate).
Part 752, section 752.401(a)(4): Adverse actions (only to the
extent necessary to provide that adverse action provisions do not apply
to reductions in rates of basic pay to offset a locality pay or special
rate supplement increase as a result of receiving a rating of record
below Successful).
Note: If any of the provisions of title 5, Code of Federal
Regulations, listed above are revised during the period this
demonstration project is in effect, U.S. Department of Education/
Federal Student Aid may choose to terminate the waiver of one or
more such provisions with respect to employees participating in the
project, without formally modifying the project itself. U.S.
Department of Education/Federal Student Aid must notify OPM when any
such waiver is terminated.
[FR Doc. E7-24259 Filed 12-13-07; 8:45 am]
BILLING CODE 6325-43-P