Recruitment and Relocation Bonuses and Retention Allowances

SUMMARY: The Office of Personnel Management (OPM) is issuing proposed

regulations to provide agencies with greater flexibility in paying

recruitment and relocation bonuses and retention allowances (the 3

R's). The proposed regulations revise certain requirements in the

current regulations to maximize agency discretion in using these

flexibilities. The 3 R's were authorized by the Federal Employees Pay

Comparability Act of 1990 (FEPCA).

DATES: Comments must be received on or before August 4, 1994.

ADDRESSES: Comments may be sent or delivered to Donald J. Winstead,

Acting Assistant Director for Compensation Policy, Personnel Systems

and Oversight Group, Office of Personnel Management, Room 6H31, 1900 E

Street NW., Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT:

Belva MacDonald or Lee Kara, (202) 606-1413.

SUPPLEMENTARY INFORMATION: On August 19, 1992, OPM published final

regulations at 57 FR 37394 to authorize the payment of recruitment and

relocation bonuses and retention allowances (the 3 R's) under the

Federal Employees Pay Comparability Act of 1990 (FEPCA). These

regulations finalized interim regulations that were published on March

28, 1991 (56 FR 12833). Overall, use of the 3 R's has been limited.

In a memorandum to the Interagency Advisory Group on October 24,

1991, OPM advised agencies to consider using the 3 R's before

requesting new or increased special salary rates under 5 U.S.C. 5305.

In most situations, the use of the 3 R's to solve staffing problems

will be less expensive than special rates. Special rates are basic pay

for such purposes as retirement benefits, premium pay, and promotions,

whereas the 3 R's are not basic pay for any purposes. The 3 R's are

also generally less expensive than superior qualifications

appointments. Superior qualifications appointments, like special salary

rates, have a lasting effect on future pay entitlements.

When necessary, the 3 R's may be used in combination with special

salary rates and superior qualifications appointments. However, payment

of one of the 3 R's alone may be the most appropriate solution for a

staffing problem. For example, a candidate may prefer a lump-sum

payment to address his or her immediate needs instead of an increase in

basic pay that would be received in relatively small amounts over a

long period of time.

Agencies have found it difficult to use the 3 R's and have

requested changes in the current regulations. OPM also has approved

variations to the requirements bonus regulations. (This is discussed

below under appointments required for recruitment bonus purposes.) OPM

is proposing the regulatory changes discussed below to increase

agencies' discretion in administering the 3 R's.

Recruitment Bonuses

Candidate quality. In Secs. 575.101, 575.104(b)(2), 575.104(c)(1)

and (c)(2) (i) and (iii), and 575.108(b), the current regulations allow

payment of a recruitment bonus only when, in the absence of such a

bonus, agencies would encounter difficulty in filling the position with

a high quality candidate. Same agencies' recruitment needs are not

limited to high quality candidates. Therefore, they have not considered

offering recruitment bonuses before requesting approval of special

salary rates. (OPM approval of special rates is not dependent upon the

recruitment of high quality candidates.) The proposed regulations would

allow an agency to pay a recruitment bonus to any qualified candidate

the agency wishes to recruit for a difficult-to-fill position. The

agency would determine the level of candidate quality it needs to

target.

Length of appointment and service agreement. In Sec. 575.103, the

current definition of ``employee'' for recruitment bonus purposes

requires an appointment of at least 2 years. The proposed regulations

would delete the language regarding the minimum length of appointment;

however, since, in Sec. 575.106(b), the proposed regulations require a

service agreement of at least 6 months, any appointment would have to

be at least that long. Currently, a minimum 12-month service agreement

is required. Reducing the requirement to 6 months would give agencies

more flexibility.

Break-in service. To meet the current definition of ``newly

appointed'' in Sec. 575.103, a candidate with prior Federal Government

service must have a break in service of at least 1 year. The proposed

regulations would reduce this break-in-service restriction to 90 days.

This parallels the 90-day-break-in-service restriction for superior

qualifications appointments in Sec. 531.203(b)(2). It allows agencies

to consider paying a recruitment bonus in more circumstances as an

alternative to paying advanced in-hire rates for superior

qualifications.

The proposed regulations add two authorized exceptions to the

break-in-service rule in Sec. 575.103. The first is a permanent

appointment that follows a provisional appointment (as defined in

Sec. 316.403). The second is an appointment that follows a temporary

appointment, provided the temporary appointment was neither full-time

nor the principal employment of the candidate. This would allow

agencies to pay recruitment bonuses in situations like those approved

by OPM as variations to the current regulations. Under the variations,

bonuses were paid to medical officers who served in temporary

appointments prior to being offered permanent appointments. The medical

officers did not meet the break-in-service requirement under current

regulations. OPM determined that payment of recruitment bonuses was

appropriate because the temporary positions were neither full-time nor

the candidates' principal employment. Also, the inability of the hiring

officials to take advantage of such opportunities would have resulted

in lengthy recruitment efforts to find qualified candidates with the

required specialized skills. (These variations were reported in former

Federal Personnel Manual Bulletins 575-4, April 20, 1993; 575-5,

October 25, 1993; and 575-6, November 12, 1993; and in OPM's

Provisional Notice No. 575-1, May 25, 1994.)

Written determination. In Sec. 575.104(c)(1), the current

regulations for recruitment bonuses require a written determination

made on a case-by-case basis for each employee. The proposed

regulations would allow an agency to make a single written

determination applicable to a group of candidates for positions that

the agency targets as difficult to fill. This would not require OPM's

prior approval.

Reporting requirement. In Sec. 575.108(b), the current regulations

for recruitment bonuses require an annual written report by each agency

on its use of recruitment bonuses. The proposed regulations would

remove this requirement. However, each agency would retain

responsibility for monitoring its use of recruitment bonuses.

Relocation Bonuses

Candidate quality. In Secs. 575.201, 575.204 (c)(1) and (c)(2) (i)

and (iii), and 575.208(b), the current regulations allow payment of a

relocation bonus only when, in the absence of such a bonus, difficulty

would be encountered in filling the position with a ``high quality

candidate.'' As for recruitment bonuses (discussed above), payment of

relocation bonuses should be considered before requesting approval of

special salary rates for difficult-to-fill positions. The proposed

regulations would allow an agency to pay a relocation bonus to any

employee the agency wishes to relocate to a position that would

otherwise be difficult to fill.

Length of appointment. In Sec. 575.203, the current definition of

``employee'' for relocation bonus purposes requires an appointment of

at least 2 years. The proposed regulation would allow the employee's

appointment to be any length of time determined appropriate by the

agency. Also, the proposed definition would make a technical change to

clarify that a relocation bonus may be paid to an employee whose duty

station is changed to a different commuting area permanently as well as

temporarily.

Written determination. In Sec. 575.204(d), the current regulations

provide for exceptions to case-by-case approvals of relocation bonuses

with prior OPM approval. The proposed regulations would allow such

exceptions without prior OPM approval.

Reporting requirement. In Sec. 575.208(b), the current regulations

for relocation bonuses require an annual written report by each agency

on its use of relocation bonuses. The proposed regulations would remove

this requirement.

Retention Allowances

Length of appointment. In Sec. 575.303, the current definition of

``employee'' for retention allowance purposes requires an appointment

of at least 2 years. The proposed regulations would allow the

employee's appointment to be any length of time determined appropriate

by the agency.

Length of service. In Sec. 575.304(a), the current regulations

permit payment of a retention allowance only to an employee who (1) has

completed 1 year of continuous service with the agency immediately

prior to such payment, or (2) has completed a period of employment

established under a service agreement for a recruitment or relocation

bonus. the proposed regulations would allow an agency to pay a

retention allowance to an employee with less than 1 year of continuous

service. However, the proposed regulations continue to require that an

employee under a service agreement for a recruitment or relocation

bonus complete such an agreement before receiving a retention

allowance.

Reason for being likely to leave. In Secs. 575.304(b) and

575.305(c), the current regulations permit payment of a retention

allowance to an employee only if he or she is likely to leave the

Federal service for employment outside the executive, legislative, or

judicial branch of the Federal Government. The proposed regulations

would allow payment of a retention allowance to an employee who is

likely to leave not only for employment outside the Federal Government,

but for a reason other than employment, such as retirement.

Reporting requirement. In Sec. 575.308(b), the current regulations

for retention allowances require an annual written report by each

agency on its use of retention allowances. The proposed regulations

would remove this requirement.

Miscellaneous

In Sec. 575.103, the definition of ``commuting area'' is not

germane to the payment of recruitment bonuses and would be removed by

the proposed regulations. (The definition would remain in Sec. 575.203

for payment of relocation bonuses.) Finally, the proposed regulations

add a new paragraph (d) in Sec. 575.306 to clarify that a retention

allowance is not pay for purposes of a lump-sum payment for annual

leave under 5 U.S.C. 5551. (See Comptroller General opinion B-249816,

March 8, 1993.)

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

Administrative practice and procedure, Government employees, Wages.

James B. King,

Director.

Accordingly, OPM is proposing to amend part 575 of title 5 of the

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; sec. 302

and 404 of the Federal Employees Pay Comparability Act of 1990 (Pub.

L. 101-509) 104 Stat. 1462 and 1466, respectively; E.O. 12748.

2. Section 575.101 is revised to read as follows:

Sec. 575.101 Purpose.

This subpart provides regulations to implement 5 U.S.C. 5753, which

authorizes payment of a recruitment bonus of up to 25 percent of basic

pay to a newly appointed employee or an individual to whom a written

offer of employment has been made by the agency, provided there is a

determination that, in the absence of such a bonus, difficulty would be

encountered in filling the position.

3. In Sec. 575.103, the definition of ``commuting area'' is

removed, and the definitions of ``employee'' and ``newly appointed''

are revised to read as follows:

Sec. 575.103 Definitions.

* * * * *

Employee means an employee in or under an agency who is newly

appointed or an individual who has received a written offer of

employment.

* * * * *

Newly appointed refers to--

(a) The first appointment, regardless of tenure, as an employee of

the Federal Government;

(b) An appointment as an employee of the Federal Government

following a break in service of at least 90 days from the candidate's

last period of Federal employment other than--

(1) Employment in a cooperative work-study program under a Schedule

B appointment made in accordance with Sec. 213.3202 of this chapter;

(2) Employment under the Stay-in-School program, in accordance with

Sec. 213.3102(w) of this chapter;

(3) Employment as a law clerk trainee under Sec. 213.3102(e) of

this chapter;

(4) Employment while a student during school vacations under a

short-term temporary appointing authority;

(5) Employment under a provisional appointment designated under

Sec. 316.403 if the new appointment is permanent and immediately

follows the provisional appointment; or

(6) Employment under a temporary appointment that is neither full-

time nor the principal employment of the candidate.

* * * * *

4. In Sec. 575.104, paragraphs (b)(2), (c)(1), and (c)(2) (i) and

(iii) are revised to read as follows:

Sec. 575.104 Agency recruitment bonus plans; higher level review and

approval; and criteria for payment.

* * * * *

(b)(2) When necessary to make a timely offer of employment, a

higher level official may establish criteria for offering recruitment

bonuses in advance and authorize the recommending official to offer a

recruitment bonus (in any amount within a pre-established range) to any

candidate without further review or approval.

(c) Criteria for payment. (1) Each bonus paid under this subpart

shall be based on a written determination that, in the absence of such

a bonus, the agency would encounter difficulty in filling the position.

Such a determination shall be made before any employee actually enters

on duty in the position for which he or she was recruited. An agency

may target groups of positions that have been difficult to fill in the

past or that may be difficult to fill in the future and may make the

required written determination to offer a recruitment bonus on a group

basis.

(2) * * *

(i) The success of recent efforts to recruit candidates for similar

positions, including indicators such as offer acceptance rates, the

proportion of positions filled, and the length of time required to fill

similar positions;

* * * * *

(iii) Labor-market factors that may affect the ability of the

agency to recruit candidates for similar positions now or in the

future;

* * * * *

5. Section 575.106 is revised to read as follows:

Sec. 575.106 Service agreement.

(a) Before a recruitment bonus may be paid, an agency shall require

that the employee sign a written service agreement to complete a

specified period of employment with the appointing agency (or successor

agency in the event of a transfer of function).

(b) The minimum period of employment to be established under a

service agreement for a recruitment bonus shall be 6 months.

6. Section 575.108 is revised to read as follows:

Sec. 575.108 Internal monitoring.

Each agency shall monitor the use of recruitment bonuses to ensure

that its recruitment bonus plan conforms to the requirements

established under this subpart and that the payment of recruitment

bonuses conforms to the criteria established under this subpart.

7. Section 575.201 is revised to read as follows:

Sec. 575.201 Purpose.

This subpart provides regulations to implement 5 U.S.C. 5753, which

authorizes payment of a relocation bonus of up to 25 percent of basic

pay to an employee who must relocate to accept a position in a

different commuting area, provided there is a determination that, in

the absence of such a bonus, difficulty would be encountered in filing

the position.

8. In Sec. 575.203, the definitions of ``employee'' and ``service

agreement'' are revised to read as follows:

Sec. 575.203 Definitions.

* * * * *

Employee means an employee in or under an agency who is appointed

to a position in a different commuting area or whose duty station is

changed permanently or temporarily to a different commuting area.

* * * * *

Service agreement means a written agreement between an agency and

an employee under which the employee agrees to a specified period of

employment with the agency at the new duty station to which relocated

in return for payment of a relocation bonus.

9. In Sec. 575.204, paragraphs (c)(1), (c)(2)(i), (c)(2)(iii), and

(d) are revised to read as follows:

Sec. 575.204 Agency relocation bonus plans; higher level review and

approval; criteria for payment; and exceptions to case-by-case

approval.

* * * * *

(c) Criteria for payment. (1) Each bonus paid under this subpart

shall be based on a written determination that, in the absence of such

a bonus, the agency would encounter difficulty in filling the position.

Each such determination shall be made before the employee actually

enters on duty in the position to which he or she was relocated. An

agency may target groups of positions that have been difficult to fill

in the past or that may be difficult to fill in the future. However,

except as provided in paragraph (d) of this section, any determination

to pay a bonus shall be made on a case-by-case basis for each employee.

(2) * * *

(i) The success of recent efforts to recruit candidates for similar

positions, including indicators such as offer acceptance rates, the

proportion of positions filled, and the length of time required to fill

similar positions;

* * * * *

(iii) Labor market factors that may affect the ability of the

agency to recruit candidates for similar positions now or in the

future; and

* * * * *

(d) Exceptions to case-by-case approval. The head of an agency may

authorize the payment of a relocation bonus to any employee whose

rating of record is at least fully successful without the requirement

for case-by-case approval when--

(1) The employee is a member of a specified group of employees

subject to a mobility agreement, and the head of an agency determines

that relocation bonuses are necessary to ensure the agency's ability to

retain employees subject to such an agreement; or

(2) A major organizational unit of an agency is relocated to a

different commuting area, and the head of an agency determines that

relocation bonuses are necessary for specified groups of employees to

ensure the continued operation of that unit without undue disruption of

an activity or function that is deemed essential to the agency's

mission and/or without undue disruption of service to the public.

10. Section 575.206 is revised to read as follows:

Sec. 575.206 Service agreement.

Before a relocation bonus may be paid, an agency shall require that

the employee sign a written service agreement to complete a specified

period of employment with the appointing agency (or the successor

agency in the event of a transfer of function) at the new duty station.

11. Section 575.208 is revised to read as follows:

Sec. 575.208 Internal monitoring.

Each agency shall monitor the use of relocation bonuses to ensure

that its relocation bonus plan conforms to the requirements established

under this subpart and that the payment of relocation bonuses conforms

to the criteria established under this subpart.

12. In Sec. 575.303, the definition of ``employee'' is revised to

read as follows:

Sec. 575.303 Definitions.

* * * * *

Employee means an employee in or under an agency.

* * * * *

13. In Sec. 575.304, paragraphs (a) and (b) are revised to read as

follows:

Sec. 575.304 Conditions for payment.

(a) If applicable, an agency may pay a retention allowance to an

employee only if the employee has completed a period of employment

established under the service agreement required for payment of a

recruitment bonus under subpart A of this part or a relocation bonus

under subpart B of this part, whichever occurs later.

(b) An agency may pay a retention allowance to an employee if the

employee is likely to leave the Federal service for any reason.

* * * * *

14. In Sec. 575.306, a new paragraph (d) is added to read as

follows:

Sec. 575.306 Payment of retention allowance.

* * * * *

(d) A retention allowance is not pay for purposes of a lump-sum

payment for annual leave under 5 U.S.C. 5551.

15. Section 575.308 is revised to read as follows:

Sec. 575.308 Internal monitoring.

Each agency shall monitor the use of retention allowances to ensure

that its retention allowance plan conforms to the requirements

established under this subpart and that the payment of retention

allowances conforms to the criteria established under this subpart.

[FR Doc. 94-16127 Filed 7-1-94; 8:45 am]

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