OPM finalizes rule tying bonuses to performance

The Office of Personnel Management on Thursday issued final rules aimed at ensuring agencies link cash awards directly to job performance.

The regulations remained largely unchanged from a draft version floated last summer, despite a number of comments expressing concern that bonuses could be influenced by bias or favoritism. Other concerns revolved around training, funding and implementation of the rule in agencies where employees are rated on a pass-fail basis.

In response to these concerns, OPM officials wrote that a requirement that awards programs make "meaningful distinctions" based on performance levels is an effective way to avoid potential favoritism. They emphasized that the regulations simply put in writing a practice many agencies already are using, and recommended agencies include checks and balances to ensure awards are fair.

Federal labor unions and others also questioned whether managers have been adequately trained to make the types of performance-level distinctions required by the new rules. Some argued more funding for training is needed.

OPM officials agreed training is critical, but emphasized that agencies are responsible for it. They noted that nothing in the regulation directly affected funding for award programs, which has "remained fairly constant, around 1 percent of payroll, for many years." Stronger performance distinctions will help agencies make better use of limited resources, officials said.

The distinctions among performance levels required by the regulation could result in larger bonuses as a percentage of base pay for employees with better ratings. But that is just one way distinctions can be demonstrated, OPM emphasized. The rule leaves agencies the flexibility to show them in other ways, such as granting larger lump-sum dollar amounts to those earning better reviews.

The regulation, which takes effect Feb. 12, also bars agencies from giving cash awards to employees earning lower than a "fully successful" rating. It does not apply to bonuses for Senior Executive Service members, who operate under a separate performance rating system. It also applies only to awards that are given on the basis of yearlong achievements encompassed in performance reviews.

In response to concerns that agencies using pass-fail systems would have difficulty making the meaningful distinctions required by the rule, OPM officials noted that those agencies tend to separate awards from yearlong ratings altogether, making the bonus programs outside the scope of the regulation. OPM also stated that agencies are increasingly moving away from pass-fail systems.