OPM orders bigger bonuses for better ratings

A year after the Bush administration first floated a legislative proposal to implement a pay-for-performance system in every federal agency, the president's personnel advisers are continuing to take steps toward such a system, despite failing so far to win congressional support for the comprehensive package.

A new draft regulation published by the Office of Personnel Management in the Federal Register Wednesday will require agencies to tie cash awards directly to performance ratings.

Bonuses, already by their nature doled out to employees based on performance, will now be allocated so that employees with higher performance ratings must receive more money than lower rated peers.

"These revisions clarify the use of performance-based cash awards by providing that such awards programs, as designed and applied, must make meaningful distinctions based on levels of performance," the regulation said. "This proposed change is designed to ensure that better performers receive greater recognition."

OPM officials said, in companion notes to the regulation, they realize many agencies already follow this procedure in granting bonuses, but the principle of more sophisticated merit-based awards is important enough to warrant a regulation.

The regulation also clarifies that all employees receiving cash awards must be rated at least at the "fully successful" level. The changes do not affect the Senior Executive Service, which is governed by its own performance management system in which all pay raises are tied to performance evaluations.

Thomas Richards, director of government affairs for the Federal Managers Association, said the regulation would not work in many agencies still operating on a pass-fail performance review system.

"How do you tier performance bonuses when you have a performance appraisal and review system, when it is based on a two-tiered model?" Richards asked. "Short of actually enacting legislation, I'm not sure how you would do that."

National Treasury Employees Union President Colleen Kelley said she wants to retain the ability to negotiate awards programs with the individual agencies.

"We do have concerns about any system that might discourage teamwork and about whether managers have the training, time and ability to fairly evaluate employees," Kelley said. "It appears to us, based on our initial reading of the proposal, that there is great potential for the disparate treatment of similarly situated employees as well as an adverse impact on certain groups of employees."

Last July, OPM, along with the Office of Management and Budget, publicized the Working for America Act, draft legislation that would require money now used for within-grade step increases and, to some extent, annual across-the-board raises, to be tied to a beefed-up performance rating system.

The Defense and Homeland Security departments, which together employ about half of the total federal civilian workforce, already received congressional authority to implement similar pay-for-performance systems. But the systems have been delayed by union-initiated lawsuits and internal challenges in designing them. Some members of Congress have said they want to wait until Defense and DHS implement their systems before extending any part of them to the domestic agencies.

But momentum for governmentwide personnel reform has not stopped completely. In addition to this bonus regulation, the administration also recently required every agency to begin small test-runs for new performance management systems.

Sen. George Voinovich, R-Ohio, introduced a bill last month that would require enhanced evaluation systems and training for federal managers, but would not tie pay raises to those ratings yet. (Voinovich's proposal, however, would tie bonuses to ratings.) Administration officials embraced Voinovich's bill as a first step on the road to Working for America Act-like legislation.

This week's regulation has only a 30-day comment period, until July 21, instead of the traditional 60-day period. OPM said that was to ensure the final regulation is in effect in time for bonus season.

Those interested in providing input can send comments to Jerome Mikowicz, OPM's acting deputy associate director for pay and performance policy, at pay-performance-policy@opm.gov.