[Federal Register Volume 66, Number 13 (Friday, January 19, 2001)]
[Proposed Rules]
[Pages 5491-5494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1486]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / 
Proposed Rules  

[[Page 5491]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 575

RIN 3206-AJ08


Recruitment and Relocation Bonuses and Retention Allowances

AGENCY: Office of Personnel Management.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Office of Personnel Management (OPM) is issuing proposed 
regulations to provide agencies with greater flexibility to use 
recruitment and relocation bonuses and retention allowances. These 
proposed regulations would provide agencies with the flexibility to pay 
retention allowances to employees who are likely to leave their 
positions for other Federal employment under certain limited 
circumstances. This proposal also would allow agencies to pay 
recruitment and relocation bonuses and retention allowances to 
prevailing rate (wage) employees.

DATES: Comments must be received on or before March 20, 2001.

FOR FURTHER INFORMATION CONTACT: Jeanne Jacobson, (202) 606-2858; FAX: 
(202) 606-0824; email: [email protected].

ADDRESSES: Comments may be sent or delivered to Donald J. Winstead, 
Assistant Director for Compensation Administration, Workforce 
Compensation and Performance Service, Office of Personnel Management, 
Room 7H31, 1900 E Street NW., Washington, DC 20415, FAX: (202) 606-
0824, or email: [email protected].

SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is 
proposing to amend the recruitment and relocation bonus and retention 
allowance regulations in 5 CFR part 575, subparts A, B, and C, to 
provide agencies with additional flexibility to use these incentives. 
The proposed regulations would allow agencies to grant a retention 
allowance to a current employee likely to leave for other Federal 
employment under certain limited circumstances. The proposed 
regulations also would allow agencies to pay recruitment and relocation 
bonuses and retention allowances to prevailing rate (wage) employees.

Retention Allowances for Employees Likely To Leave for Other 
Federal Employment

    Under current law (5 U.S.C. 5754), OPM may authorize agencies to 
grant a retention allowance to an employee if 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 
agency determines that the employee would be likely to leave in the 
absence of an allowance. Our regulations initially authorized agencies 
to grant retention allowances only if the employee was likely to leave 
the Federal service for employment outside the executive, legislative, 
or judicial branch of the Federal Government (60 FR 12833, March 28, 
1991). Later, we broadened this authority to provide agencies with the 
flexibility to grant retention allowances to employees who were likely 
to leave the Federal service for any reason (60 FR 33323, June 28, 
1995). We did not authorize agencies to pay retention allowances to 
employees likely to leave for other Federal employment because of 
concerns about potentially disruptive and costly bidding wars among 
Federal agencies competing for employees with highly desired skills or 
competencies.
    Agencies have recently requested that OPM amend its regulations to 
authorize retention allowances for employees likely to leave for other 
Federal employment in certain limited circumstances. We recognize that 
agencies may experience significant staffing problems that hinder their 
ability to meet mission objectives when their employees leave for other 
Federal jobs. In some cases, the retention allowance authority may be 
the most effective way to resolve such problems. However, we must also 
continue to be cognizant of the potential costs of interagency 
competition.
    We propose to amend the regulations at 5 CFR 575.304(b) to allow 
agencies to pay a retention allowance to an employee likely to leave 
for other Federal employment when (1) the other Federal position is 
under a different pay system (with certain exceptions) or (2) it is 
essential to retain the employee during a temporary but critical work 
situation. (Agencies would continue to have authority under 
Sec. 575.304(b)(1) to pay retention allowances to employees who are 
likely to leave the Federal service for any reason.)
    Section 575.304(b)(2) of the proposed regulations would authorize 
an agency to pay a retention allowance to an employee likely to leave 
for another Federal position that is under a pay system that is 
different from the pay system of the employee's current position. The 
proposed regulations would prohibit agencies from using this authority 
to pay retention allowances to an employee likely to leave for a 
General Schedule (GS), prevailing rate (wage), senior-level and 
scientific or professional (SL/ST), Senior Executive Service (SES), 
administrative law judge (ALJ), Executive Schedule (EX), or Board of 
Contract Appeals (BCA) position when his or her current position is 
also under any of these pay systems. (See proposed Sec. 575.304(d).)
    For example, using this new authority an agency could pay a 
retention allowance to a General Schedule employee likely to leave for 
a higher-paying position under a pay system outside of title 5, United 
States Code, (e.g., the Federal Aviation Administration). In this 
situation, the recruiting agency may have independent statutory 
authority to offer salaries or other incentives that are greater than 
those available under the General Schedule, making it very difficult 
for the employee's current agency to compete effectively. We believe 
allowing agencies to grant retention allowances in such situations will 
help level the playing field among agencies with similar staffing 
needs.
    Section 575.304(b)(3) of the proposed regulations would allow 
Federal agencies to grant retention allowances to an employee likely to 
leave for other Federal employment (under the same or different pay 
system) during temporary but critical staffing situations. Private 
sector organizations pay ``staying-on'' or ``retention bonuses'' to 
help retain employees and keep operations running smoothly during 
``crisis'' situations, such as mergers, acquisitions, and plant 
closings. We believe it would be reasonable to allow Federal agencies 
to use the retention allowance authority on

[[Page 5492]]

a temporary basis to help retain experienced employees who otherwise 
would be likely to leave during similar critical periods.
    For example, an agency may need to retain an employee until the 
completion of a project critical to the mission of the agency or during 
the closure of a facility or office or the relocation of an office or 
facility to a different commuting area. Such employees may be likely to 
leave for other Federal employment if, for example, the agency has 
announced that it will eliminate or substantially change the duties of 
the employee's position as a result of the critical situation or upon 
completion of the important project or if the office relocation will 
compel the employee to change his or her residence to continue 
employment. A retention allowance may help entice an employee to stay 
through the temporary but critical work period.
    To help ensure that agencies use this new authority only for 
temporary staffing difficulties, Sec. 575.307(b) would limit payment of 
retention allowances to an employee working on a critical project to a 
period of no longer than 1 year. On a case-by-case basis, the head of 
an agency may ask OPM to extend this time limit. The proposed 
regulations would allow an agency to pay retention allowances to an 
employee likely to leave for other Federal employment prior to an 
office closure or relocation as long as the agency continues to have an 
essential need for the employee's services.
    When authorizing a retention allowance for an employee likely to 
leave for other Federal employment under Sec. 575.304(b)(2) and (3), 
the proposed regulations would require agencies to follow the payment 
criteria and documentation provisions currently prescribed in 
Sec. 575.305(c). In addition, before approving a retention allowance 
for an employee who is likely to leave during a critical work period, 
Sec. 575.305(c)(2) of the proposed regulations would require the agency 
to determine how the employee's departure would affect its ability to 
function effectively during the critical period.
    The proposed regulations at Sec. 575.305(c)(3)(iii) also would 
require agencies to consider other relevant factors when authorizing a 
retention allowance and determining the amount for an employee who is 
likely to leave for other Federal employment. These factors may include 
the likelihood of attracting candidates to fill the employee's position 
if the agency has announced that it will relocate the position, the 
cost and time required to hire and train a new employee to complete a 
critical project, or the salaries typically paid by another Federal 
agency.
    To help avoid unwarranted and possibly costly interagency 
competition, Sec. 575.305(c)(4) of the proposed regulations also would 
require agencies to consider the use of non-pay alternatives to help 
resolve staffing problems before paying a retention allowance to an 
employee likely to leave for another Federal position. Such non-pay 
alternatives may include alternative recruitment strategies; use of 
temporary or term appointments or appointments with varying work 
schedules, such as part-time, intermittent, and seasonal schedules; 
employment of experts and consultants; alternative work schedules 
(i.e., flexible or compressed work schedules), job sharing, and 
telecommuting arrangements; paying or sharing the cost of employee 
training and higher education; or redesigning jobs so that a larger 
pool of candidates may qualify for a position or to make a job more 
appealing to candidates by adding desirable duties or eliminating 
undesirable duties.
    All other conditions and requirements for paying a retention 
allowance under 5 CFR part 575, subpart C, would continue to apply to 
employees who receive an allowance on the basis of being likely to 
leave for other Federal employment. For example, Secs. 575.306(c) and 
575.307(b) would require agencies to reduce or terminate a retention 
allowance paid to an employee likely to leave for other Federal 
employment when the conditions giving rise to the original 
determination to pay the allowance have changed. In addition, under 
Sec. 575.307(d)(4), an agency could authorize a retention allowance of 
up to 10 percent (or up to 25 percent with OPM approval) of an 
employee's rate of basic pay for a group or category of employees 
likely to leave for other Federal employment. (In response to agency 
inquiries, the proposed regulations at Sec. 575.305(c)(1) clarify that, 
when the group retention allowance authority is not used, agencies must 
make likely-to-leave determinations (for any reason, including for 
other Federal employment) only on an individual, case-by-case basis.)

Recruitment, Relocation, and Retention Payments for Prevailing Rate 
(Wage) Employees

    Sections 5753(e) and 5754(e) of title 5, United States Code, permit 
the President to authorize the application of recruitment, relocation, 
and retention payments to one or more categories of employees in an 
agency who would not otherwise be covered by these provisions of law 
upon the request of the head of the agency. Under section 6 of 
Executive Order 12748 of February 1, 1991, the President delegated this 
authority to the Director of OPM. In response to an agency request, 
these proposed regulations would provide agencies with discretionary 
authority to pay recruitment and relocation bonuses and retention 
allowances to an employee in a prevailing rate (wage) position, as 
defined in 5 U.S.C. 5342(a)(3). This would include Federal Wage System 
or ``wage grade'' employees. Under the proposed regulations, the same 
payment criteria, procedures, and documentation requirements that apply 
to other covered groups of employees also would apply to wage 
employees.

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 would not have a significant 
economic impact on a substantial number of small entities because they 
would 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, OPM is proposing to amend part 575 of title 5, Code of 
Federal Regulations, as follows:

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), 5753, 5754, and 5755; secs. 302 
and 404 of the Federal Employees Pay Comparability Act of 1990 
(FEPCA) (Pub. L. 101-509), 104 Stat. 1462 and 1466, respectively; 
E.O. 12748, 3 CFR, 1992 Comp., p. 316.

Subpart A--Recruitment Bonuses

    2. In Sec. 575.102, paragraph (a)(5) is amended by removing ``or''; 
paragraph (a)(6) is amended by removing ``.'' and inserting in its 
place ``; or''; and a new paragraph (a)(7) is added to read as follows:


Sec. 575.102  Delegation of authority.

    (a) * * *

[[Page 5493]]

    (7) A prevailing rate position, as defined in 5 U.S.C. 5342(a)(3).
* * * * *

Subpart B--Relocation Bonuses

    3. In Sec. 575.202, paragraph (a)(5) is amended by removing ``or''; 
paragraph (a)(6) is amended by removing ``.'' and inserting in its 
place ``; or''; and a new paragraph (a)(7) is added to read as follows:


Sec. 575.202  Delegation of authority.

    (a) * * *
    (7) A prevailing rate position, as defined in 5 U.S.C. 5342(a)(3).
* * * * *

Subpart C--Retention Allowances

    4. In Sec. 575.302, paragraph (a)(5) is amended by removing ``or''; 
paragraph (a)(6) is amended by removing ``.'' and inserting in its 
place ``; or''; and paragraph (a)(7) is added to read as follows:


Sec. 575.302  Delegation of authority.

    (a) * * *
    (7) A prevailing rate position, as defined in 5 U.S.C. 5342(a)(3).
* * * * *
    5. In Sec. 575.303, the definition of commuting area is added in 
alphabetical order to read as follows:


Sec. 575.303  Definitions.

* * * * *
    Commuting area has the meaning given that term in Sec. 575.203.
* * * * *
    6. In Sec. 575.304, paragraph (d) is redesignated as paragraph (e), 
paragraphs (b) and (c) are revised, and a new paragraph (d) is added, 
to read as follows:


Sec. 575.304  Conditions for payment.

* * * * *
    (b) An agency may consider an employee likely to leave if he or she 
is--
    (1) Likely to leave the Federal service for any reason;
    (2) Likely to leave his or her position for another Federal 
position under a different pay system (except as provided in paragraph 
(c) of this section); or
    (3) Likely to leave his or her position for a position under the 
same or different Federal pay system prior to the closure of the 
employee's office or facility; relocation of the employee's office or 
facility to a different commuting area; or the completion of a project 
critical to the mission of an agency.
    (c) An agency may not pay a retention allowance under paragraph 
(b)(2) of this section to an employee likely to leave for a General 
Schedule, prevailing rate (wage), senior-level and scientific or 
professional, Senior Executive Service, administrative law judge, 
Executive Schedule, or Board of Contract Appeals position when his or 
her current position is also under any of these pay systems.
    (d) An agency may not pay a retention allowance to an employee who 
is likely to leave his or her position for another Federal position 
other than under the conditions described in paragraphs (b)(2) and (3) 
of this section.
* * * * *
    7. In Sec. 575.305, paragraphs (a)(2)(iii), (c), and (d)(1)(i) are 
revised to read as follows:


Sec. 575.305  Agency retention allowance plans; higher level review and 
approval; and criteria for payment.

    (a) * * *
    (2) * * *
    (iii) Procedures for paying allowances; and
* * * * *
    (c) Criteria for payment. (1) An agency must base each allowance 
paid under this subpart on a written determination 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 that, in the absence of such an allowance, the employee 
would be likely to leave under one of the conditions specified in 
Sec. 575.304(b). Except when using the group retention allowance 
authority under paragraph (d) of this section, an agency must make the 
determination that an employee is likely to leave on an individual, 
case-by-case basis.
    (2) An agency must base the determination required by paragraph 
(c)(1) of this section on a written description of the extent to which 
the employee's departure would affect the agency's ability to carry out 
an activity or perform a function that the agency deems essential to 
its mission or to operate effectively during a critical period.
    (3) An agency must consider the following factors, as applicable in 
the case at hand, in determining whether to pay a retention allowance 
and the amount of any such payment:
    (i) The success of recent efforts to recruit candidates and retain 
employees with qualifications similar to those possessed by the 
employee for positions similar to the position held by the employee;
    (ii) The availability in the labor market of candidates for 
employment who, with minimal training or disruption of service to the 
public, could perform the full range of duties and responsibilities of 
the employee's position; or
    (iii) Other supporting factors, such as the likelihood of 
attracting candidates to fill the employee's position if the agency has 
announced that it will soon relocate the position, the cost and time 
required to hire and train a new employee to complete a critical, time-
sensitive project, or the salaries typically paid by another Federal 
agency.
    (4) For an employee likely to leave for other Federal employment 
under the conditions described in Sec. 575.304(b)(2) and (3), the 
agency must consider the use of non-pay solutions to help retain the 
employee before authorizing a retention allowance. Such solutions may 
include conducting an aggressive recruiting program, using alternative 
appointing authorities, redesigning jobs, establishing training 
programs, implementing alternative work schedules, or improving working 
conditions.
    (d) * * *
    (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 to which OPM has delegated 
authority to approve retention allowances to agency heads under 
Sec. 575.302(c)). An agency must determine in writing 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. The agency must 
also determine in writing 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 under one of the conditions specified in 
Sec. 575.304(b) in the absence of an allowance.
* * * * *
    8. In Sec. 575.306, paragraph (c) is revised to read as follows:


Sec. 575.306  Payment of retention allowance.

* * * * *
    (c) An agency may continue paying a retention allowance as long as 
the conditions giving rise to the original determination to pay the 
allowance still exist, except as provided in Sec. 575.307(a) and (b). 
However, at least annually, the agency must review each determination 
to pay an allowance to determine whether payment is still warranted. 
The agency approving official must certify this determination in 
writing.
* * * * *
    9. In Sec. 575.307, paragraphs (b) and (c) are redesignated as 
paragraphs (c) and

[[Page 5494]]

(d), respectively, and a new paragraph (b) is added to read as follows:


Sec. 575.307  Reduction or termination of retention allowance.

* * * * *
    (b) An agency must terminate a retention allowance paid to an 
employee (or group of employees) under Sec. 575.304(b)(3) (for work on 
a project critical to the mission of the agency) not later than 1 year 
after the initial allowance payment. On a case-by-case basis, the head 
of an agency may ask OPM to extend this time limit.
* * * * *
[FR Doc. 01-1486 Filed 1-18-01; 8:45 am]
BILLING CODE 6325-01-P