[Federal Register Volume 64, Number 245 (Wednesday, December 22, 1999)]
[Rules and Regulations]
[Pages 71633-71635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33178]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 245 / Wednesday, December 22, 1999 /
Rules and Regulations
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 575
RIN 3206-AI31
Retention Allowances
AGENCY: Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The Office of Personnel Management (OPM) is issuing final
regulations to provide agencies with greater flexibility to pay
retention allowances of up to 10 percent of an employee's rate of basic
pay (or up to 25 percent with OPM approval) to a group or category of
employees in certain limited circumstances. This flexibility will help
agencies retain the specialized skills they need to meet their work
requirements. The final regulations revise the interim regulations to
provide further guidance on defining the covered group or category of
employees, to clarify the intended use of a retention allowance, and to
add references to a group or category of employees in provisions
dealing with the reduction or termination of retention allowances.
EFFECTIVE DATE: January 21, 2000.
FOR FURTHER INFORMATION CONTACT: Paul Shields, (202) 606-2858; FAX
(202) 606-0824; EMAIL: [email protected].
SUPPLEMENTARY INFORMATION: On June 23, 1998, the Office of Personnel
Management (OPM) published interim regulations to provide agencies with
discretionary authority to pay retention allowances of up to 10 percent
of an employee's rate of basic pay (up to 25 percent with OPM approval)
to a group or category of employees in certain limited circumstances
(63 FR 34119). Interested parties were invited to comment for a 60-day
period. OPM received comments from three agencies. All three agencies
expressed support for the additional flexibility provided by the
interim regulations. Specific comments are discussed below along with a
description of changes made in the final regulations.
Administering the Discretionary Authority
One agency expressed concern regarding the administration of the
discretionary authority. The agency expressed concern that it may be
difficult to justify the exclusion of individuals from an identified
group or to identify a group that includes only individuals whom the
agency is anxious to retain. The agency believes the decision to
approve a group retention allowance might be highly judgmental. Another
agency asked whether employees newly hired into a group receiving a
retention allowance could be (or should be) excluded from receiving the
allowance.
We believe the type of discretion currently used to make a judgment
for paying a retention allowance on a case-by-case basis to individual
employees is essentially the same used in making a determination for a
category of employees. Similar to the case-by-case determinations,
agencies must authorize retention allowances based on written
determination that employees have unusually high or unique
qualifications or that the agency has a special need for the employees'
services that makes it essential to retain the employees in that
category. What is different is that the regulations do not require
agencies to determine whether each individual in the targeted group is
likely to leave Federal service. Instead, agencies must determine
whether there is a high risk that a significant number of employees in
the targeted category are likely to leave Federal service in the
absence of an allowance. Section 575.305(d)(1) requires agencies to
have evidence of labor market conditions or other factors to fully
support this determination.
It is essential, therefore, that agencies clearly define the
characteristics and coverage criteria of the identified category of
employees. These criteria may include the minimum length of service a
newly hired employee must fulfill with the agency before being covered
by an identified group. If an appropriate group cannot be clearly
defined by specific factors, or if labor market or other conditions do
not indicate that there is a high risk that a significant number of
employees in the group is likely to leave, then consideration should be
given to granting retention allowances to selected employees in the
identified group on a case-by-case basis as justified by the
circumstances of the individual case. To provide further guidance to
agencies on defining the covered group, we have added language to 5 CFR
575.305(d)(1) that identifies the types of factors that may be used to
define the group.
Several agencies have informally requested clarification on whether
a retention allowance may be offered when recruiting an employee from
another agency when it knows the employee has a private sector job
offer and is likely to leave Federal Service. Retention allowances are
not intended to be used as a recruitment tool, especially when
recruiting an employee from another agency. Section 575.305(b)(2) of
the regulations further provides that a retention allowance may only be
offered to an employee in or under an agency and based on the agency's
determination that the employee's departure would affect the agency's
ability to carry out an activity or perform a function that is deemed
essential to the agency's mission. Therefore, in order for an agency to
make its case, the employee would have to have been hired and
performing a critical function for a period of time immediately prior
to the payment of a retention allowance. To clarify this intent, we
have added a new paragraph (d) to Sec. 575.304 to read,``An agency may
not offer a retention allowance to an individual (or authorize the
payment of such an allowance) prior to the individual's employment with
the agency.''
Amount of Retention Allowance
One agency believes the interim regulations effectively allow an
agency to provide a 10 percent pay raise to a significant number of
employees. The agency supports the requirement for OPM approval of
group/category retention allowances of more than 10 percent, thus
guarding against the potential for creating an uneven playing field
without reasonable notice to similarly-situated agencies. Another
agency expressed concern that limiting the amount of the retention
allowance
[[Page 71634]]
an agency can pay to a group of employees dilutes the effectiveness of
extending the flexibility. The agency believes there would be no
advantage to invoking this new provision unless 10 percent has already
been determined to be a sufficient incentive for the situation. The
agency also expressed concern that if it does seek OPM approval of a
higher percentage, the agency must coordinate with other agencies, thus
removing from the agency's control the discretionary flexibility which
is part of the recruitment incentive.
We have not adopted any change in the amount of the retention
allowance payable without OPM approval. We do not believe it would be
desirable to allow individual Federal agencies to authorize retention
allowances greater than 10 percent for an entire group of employees
without coordination with other agencies with similar recruitment and
retention needs. It would not be productive to have bidding wars
between agencies, thereby depleting some agencies of the skilled
workers they need. If an agency wishes to authorize an allowance of
more than 10 percent, the current retention allowance authority in 5
U.S.C. 5754 and 5 CFR part 575, subpart C, continues to provide
agencies with discretionary authority to pay a retention allowance of
up to 25 percent of basic pay to individual employees on a case-by-case
basis based on their unique qualifications or a special need of the
agency if the employee would be likely to leave Federal service without
the allowance.
Other Comments
One agency suggested that editorial changes should be made in the
existing regulations in Secs. 575.301 and 575.305 to add references to
a group or category of employees in each place where a single employee
is referenced. In addition, the agency suggested that the final
regulations discuss the subsequent adjustment or discontinuation of
retention allowances that have been approved on a group or category
basis. The agency recommended that the regulations explicitly authorize
agencies to adjust or discontinue such allowances either on a group/
category basis or on a case-by-case basis.
OPM did not adopt the suggestion to add a reference to ``a group or
category of employees'' in each place where an individual employee is
referenced. In the interim regulation, we deliberately placed the
authority and criteria for paying retention allowances on a group or
category basis in a separate paragraph (d) at the end of Sec. 575.305.
We continue to believe this is the simpler and better approach.
OPM agrees with the comment that the final regulations should
discuss the subsequent adjustment or discontinuation of retention
allowances for a group or category of employees, as applicable. We have
added the term ``group or category of employees'' in Sec. 575.307(b),
which discusses the reduction or termination of retention allowances.
E.O. 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with E.O. 12866.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will apply only to Federal agencies and employees.
List of Subjects in 5 CFR Part 575
Government employees, Wages.
U.S. Office of Personnel Management.
Janice R. Lachance,
Director.
Accordingly, the interim rule amending part 575 of title 5 of the
Code of Federal Regulations, which was published at 63 FR 34119 on June
23, 1998, is adopted as final with the following changes:
PART 575--RECRUITMENT AND RELOCATION BONUSES; RETENTION ALLOWANCES;
SUPERVISORY DIFFERENTIALS
1. The authority citation for part 575 continues to read as
follows:
Authority: 5 U.S.C. 1104(a)(2), 5733, 5754, and 5755; secs. 302
and 404 of the Federal Employees Pay Comparability Act of 1990 (Pub.
L. 101-509), 104 Stat. 1462 and 1466, respectively; E.O. 12748, 3
CFR, 1992 Comp., p. 316.
Subpart C--Retention Allowances
2. Section 575.304 is amended by adding a new paragraph (d) to read
as follows:
Sec. 575.304 Conditions for payment.
* * * * *
(d) An agency may not offer a retention allowance to an individual
(or authorize the payment of such an allowance) prior to the
individual's employment with the agency.
3. In Sec. 575.30, paragraph (d) is revised to read as follows:
Sec. 575.305 Agency retention allowance plans; higher level review and
approval; and criteria for payment.
* * * * *
(d) Approval of retention allowances for groups or categories of
employees. (1)(i) An agency may authorize a retention allowance of up
to 10 percent of an employee's rate of basic pay for a group or
category of employees (excluding individuals covered by Sec. 575.302(a)
(2), (3), (5), or (6) or those in similar positions with respect to
which the authority to approve retention allowances has been delegated
to agency heads by OPM under Sec. 575.302(c)) based on a written
determination that the category of employees has unusually high or
unique qualifications, or that the agency has a special need for the
employees' services that makes it essential to retain the employees in
that category, and that it is reasonable to presume that there is a
high risk that a significant number of employees in the targeted
category are likely to leave Federal service in the absence of the
allowance.
(ii) The determination that there is a high risk that a significant
number of employees in the targeted category are likely to leave 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 private sector
salaries, or other similar conditions.
(iii) The targeted category should be narrowly defined using
factors that relate to the conditions described in paragraph (d)(1)(i)
of this section. Factors that may be appropriate include the following:
occupational series, grade level, distinctive job duties, unique
qualifications, assignment to a special project, minimum agency service
requirements, organization or team designation, geographic location,
and performance level.
(While performance level may be a factor used in defining the
targeted category, performance level by itself is not sufficient to
justify a retention allowance. Performance level may function as a
supporting factor in authorizing an allowance or setting the allowance
rate only to the extent it directly relates to the conditions in
paragraph (d)(1)(i).)
(2) Upon the request of the head of an agency, OPM may approve a
retention allowance in excess of 10 percent, but not more than 25
percent, of an employee's rate of basic pay for a group of category or
employees which meets the conditions specified in paragraph (d)(1) of
this section. OPM may require that such requests be coordinated with
other agencies having similarly situated employees in the same
category. Group
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retention allowance requests must include--
(i) A description of the group or category and number of employees
to be covered by the proposed retention allowance;
(ii) A written determination that the group or category or
employees meets the conditions specified in paragraph (d)(1) of this
section;
(iii) The proposed percentage retention allowance payment and a
justification for that percentage;
(iv) The expected duration of retention allowance payments; and
(v) Any other information pertinent to the case at hand.
(3) All other conditions and requirements for payment under this
subpart must be met before a retention allowance may be paid to any
individual employee under paragraphs (d)(1) or (d)(2) of this section.
4. In Sec. 575.307, paragraphs (b)(1), (b)(2), and (b)(3) are
revised to read as follows:
Sec. 575.307 Reduction or termination of retention allowance.
* * * * *
(b) * * *
(1) A lesser amount (or none at all) would be sufficient to retain
the employee (or group or category of employees);
(2) Labor-market factors make it more likely (or reasonably likely)
to recruit a candidate with qualifications similar to those possessed
by the employee (or group or category of employees);
(3) The agency's need for the services of the employee (or group or
category of employees) has been reduced to a level that makes it
unnecessary to continue payment at the level originally approved (or at
all); or
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[FR Doc. 99-33178 Filed 12-21-99; 8:45 am]
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