The Very Best Senior Executives Can Get Bigger Bonuses Next Year

Agencies can reward top senior executives with more bonus money in fiscal 2017, and the Obama administration is reminding them to use that increased flexibility wisely.

The aggregate spending cap on agency performance awards for those in the Senior Executive Service as well as other senior-level career positions will go from 4.8 percent to 7.5 percent in fiscal 2017 to reflect job performance during this fiscal year. The increase, which takes effect on Oct. 1, is part of President Obama’s December 2015 executive order aimed at streamlining SES hiring, improving the corps’ development and making adjustments to pay to help recruit and retain talented leaders.

Agencies should make meaningful distinctions among senior employees when it comes to handing out performance bonuses, “providing substantial monetary awards for the very best SES and SL/ST performers and allowing more variance of award amounts among rating levels, which is a common attribute of pay-for-performance systems,” said Aug. 12 guidance to agencies from Office of Management and Budget Director Shaun Donovan and acting Office of Personnel Management Director Beth Cobert. SL refers to Senior Level employees, while ST applies to Senior Professional and Scientific employees.

OMB and OPM also noted that agencies can spend up to 1 percent of the aggregate salaries of SES and SL/ST employees for individual contribution awards, such as special act awards, which are paid to recipients throughout the fiscal year and can be used “to recognize executives’ significant contributions toward mission even if they are not rated at the highest rating levels,” the memo said. Donovan and Cobert encouraged agencies to begin discussing now “the philosophy of how the agency expects to apply the new 7.5 percent limit, solicit input and ideas, and generally communicate what changes can be expected.”

The administration will issue guidance to agencies separately on performance awards for non-SES/SL/ST employees.

Cobert and Donovan stressed that the highest performance ratings, largest performance awards and any pay adjustments should go to “those senior leaders who take on the most challenging assignments, use exemplary innovative and collaborative methods, take on challenging rotational assignments, and/or have the greatest impact on agency priorities and mission imperatives in a given performance period.”

Pay adjustments for members of the SES “must generally be performance (i.e., rating) based” under Title 5, according to June OPM guidance. But “it may be appropriate for the agency to take into consideration subordinate GS pay (e.g., in determining complexity and scope of responsibilities) to determine if a pay adjustment is warranted” for incoming senior executives or those being reassigned or transferred. However, “OPM would not expect to see a pay increase for any career SES member reassigned or transferred due to poor performance,” said the June 28 document.

Obama’s December 2015 executive order also directs agencies to improve the hiring, onboarding, and development of senior executives. The E.O. wants senior executives to be more mobile, working in different departments and jobs in government and elsewhere, aiming to have 15 percent of senior executives governmentwide rotate each year, for a minimum of 120 days. The June 28 guidance notes that “not every executive in an agency is required to rotate” and that some agencies will rotate more than 15 percent each year, and others less than that, depending on their needs. “Since the average tenure of an executive is about six years, this assumes that most executives will rotate on average once during their tenure,” OPM said.

Agencies have to begin implementing their SES rotation plans by Oct. 1.