Agencies asked to cut performance awards

Federal agencies must scale back bonuses paid to Senior Executive Service members and other senior-level employees for the next two years, according to Obama administration officials.

In a June 10 memorandum to agency heads, Office of Personnel Management Director John Berry and Office of Management and Budget Deputy Director for Management Jeff Zients wrote that total spending on individual performance awards for SES and scientific and professional employees must equal no more than 5 percent of aggregate salaries. For bonuses paid to all other workers, that total drops to just 1 percent. The restrictions apply through fiscal 2012.

The guidance is intended to rein in spending due to tight budgets. Agencies will not be required to limit the number of employees who receive performance awards, but the overall decline in funding for bonuses could affect that number, the memo stated. "In many cases, awards are broadly and inconsistently allocated and some federal employees have come to expect awards as part of their compensation," Berry and Zients wrote. "At the same time, recent survey results show that a large number of both agency managers and employees do not perceive the current employee performance management/award systems to be fair or accurately reflect differences in performance levels."

According to the memo, political appointees are excluded from the cuts. President Obama in August 2010 ordered a freeze on appointee bonuses through fiscal 2011. Agencies should continue to apply the freeze for an additional year, the memo stated. Recruitment, retention and relocation incentives, along with quality step increases, also will not be affected.

Carol A. Bonosaro, president of the Senior Executives Association, expressed concern that the total number of awards will decrease. Previously, agencies could spend 10 percent of aggregate salaries on bonuses, and employees were eligible for a minimum increase of 5 percent and a maximum of 20 percent. Since awards still must amount to at least that minimum, fewer employees will receive awards.

"We've had the pay freezes and now the cutback in performance awards," she said. "All of the pay adjustments are based on performance. It's not much of a pay for performance system."

The memo also asks agencies to improve performance appraisal processes by incorporating consistent manager feedback and boosting transparency. Agencies should use awards in meaningful ways to reward good work and also should work with labor representatives, according to Berry and Zients.

"It is critical that these awards be managed in a manner that is cost-effective for agencies and successfully motivates strong employee performance," the memo stated.

The administration also is cracking down on within-grade increases awarded to poor performers. Berry last week sent a memo to agency heads reminding them that step increases should not be given to employees with performance ratings below "fully successful" or the equivalent.