Recruitment and Relocation Bonuses and Retention Allowances

SUMMARY: The Office of Personnel Management is issuing final

regulations to provide agencies with greater flexibility in paying

recruitment and relocation bonuses and retention allowances (the 3

R's).

EFFECTIVE DATE: These regulations are effective July 28, 1995, except

the amendment to 5 CFR 531.101, which is effective on the first day of

the first applicable pay period beginning on or after January 1, 1995.

FOR FURTHER INFORMATION CONTACT:

Bryce Baker, (202) 606-2858.

SUPPLEMENTARY INFORMATION: On July 5, 1994, the Office of Personnel

Management (OPM) published proposed revisions in the current

regulations on recruitment and relocation bonuses and retention

allowances (59 FR 34393). Interested parties were invited to comment

for a 30-day period. OPM received comments from 13 agencies. Eleven

agencies expressed support for the majority of the proposed changes and

commented favorably on the increased flexibility provided by the

proposed regulations. Comments included support for the overall goal of

eliminating regulatory restrictions and administrative requirements in

the spirit of the National Performance Review. Specific comments are

discussed below along with a description of changes made in the final

regulations.

Recruitment Bonuses

Service Agreement

One agency proposed that there be no minimum time limit for a

service agreement for payment of a recruitment bonus. Another agency

proposed keeping the 12-month minimum requirement and stated that it

would be difficult for the agency to specify an agency requirement of

12 months if the regulations require a minimum of 6 months. We have not

adopted either of these suggestions. The final regulations require a

service agreement for a minimum period of 6 months, as proposed, in

order to increase agency flexibility while maintaining a requirement

for a reasonable minimum period. An agency may require a longer minimum

period in its recruitment bonus plan.

Break in Service

One agency commented that the exception to the break-in-service

requirement for a temporary appointment in paragraph (b) of the

definition of ``newly appointed'' in 5 CFR 575.103 should not be

limited to a temporary appointment that is not full-time and not the

employee's principal employment. The agency also suggested that a 30-

day special need appointment should be an exception to the break-in-

service requirement. We have not adopted these suggestions. Allowing

payment of a recruitment bonus following an appointment that is not

full-time and not the employee's principal employment assists agencies

in recruiting candidates for difficult-to-fill positions who have

worked for the Federal Government for brief periods, such as physicians

who have served as members of boards or advisory committees. However,

an employee's acceptance of a full-time temporary appointment without a

bonus, such as a special need appointment to begin work before the

examining process can be completed, is an indication that a bonus is

not needed as a recruitment incentive.

A technical correction has been made in the definition of ``newly

appointed'' (Sec. 575.103) to reflect the recent consolidation of

student employment programs into one program entitled the Student

Educational Employment Program. (See 5 CFR 213.3202, as revised on

December 16, 1994 (59 FR 64839).) Employment in a cooperative work-

study program and employment under the Stay-in-School program have been

removed and replaced by employment under the Student Educational

Employment Program. The Student Educational Employment Program has two

components--the Student Temporary Employment Program and the Student

Career Experience Program. Employment under either program will not be

considered service for purposes of the 90-day break-in-service rule.

An agency questioned whether the term ``principal employment'' in

the last paragraph of the definition of ``newly appointed'' in

Sec. 575.103 refers to the majority of an individual's hours of

employment or to the majority of an individual's income from

employment. ``Principal employment'' refers to either the majority of

hours of employment or income from employment. If an individual is

engaged in Federal employment that accounts for a majority of his or

her hours of employment or his or her income from employment, a

recruitment bonus is not warranted, and such employment is not an

exception to the 90-day break-in-service required to meet the

definition of ``newly appointed.''

One agency said it was unclear whether the appointments listed in

paragraph (b) of the definition of ``newly appointed'' in Sec. 575.103

are allowed or precluded during the 90-day break-in-service requirement

in that paragraph. We believe paragraph (b) clearly indicates that the

appointments listed do not count as service in applying the break-in-

service requirement for payment of a recruitment bonus.

Candidate Quality

An agency commented that recruitment bonuses should be available

for difficult-to-fill positions or for highly-qualified candidates. In

order to pay a recruitment bonus, it must be determined that an agency

would be likely, in the absence of such a bonus, to encounter

difficulty in filling the position, as required by 5 U.S.C. 5753(a).

Therefore, the requirement that the candidate must be highly qualified

is not sufficient, by itself, to justify the payment of a recruitment

bonus. (Often, there are many highly qualified canadidates for

positions that are not difficult to fill.)

An agency commented that the regulations should continue to require

that a candidate be highly qualified for [[Page 33324]] payment of both

recruitment and relocation bonuses. OPM has not adopted this

recommendation. OPM has advised agencies to consider using the 3 R's

before requesting any new or increased special salary rates because,

unlike the 3 R's, special rates are basic pay and, in most situations,

are more expensive than the 3 R's. As explained in the supplementary

information for the proposed regulations, the requirement that a

candidate be highly qualified is being removed because it has been

cited as a barrier to considering the payment of recruitment bonuses

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

5305. Provided that minimum qualification requirements established by

OPM are met, agencies may tailor qualification requirements to meet the

specific needs of the agency. Also, it is up to each agency to

determine the level of candidate quality it should target when offering

a recruitment or relocation bonus. Another agency questioned whether

this change means that bonuses could be offered to candidates who are

not well qualified. It does not. Any candidate offered a recruitment

bonus must meet the qualification requirements established for the

position and be among the best qualified in order to be selected.

Definition of Commuting Area

An agency commented that the definition of ``commuting area''

should not be removed from the regulations for recruitment bonuses

because this term appears in the definition of ``involuntarily

separated.'' We agree. The definition will not be removed.

Definition of ``Employee''

An agency commented that the definition of ``employee'' for

purposes of recruitment bonuses was not clearly worded with respect to

the coverage of certain individuals prior to commencement of their

appointments. We have revised the definition to make clear that, prior

to the starting date of actual employment, only those individuals who

have accepted an offer to be newly appointed and who have signed the

required service agreement are eligible to be paid recruitment bonuses.

Relocation Bonuses

Case-by-Case Determination

There are certain exceptions to the requirement for case-by-case

approval of relocation bonuses, such as relocation of a major

organizational unit for which continued operation must be ensured

without undue disruption. The positions to which employees are

relocated in this circumstance must be determined to be difficult to

fill, as required by 5 U.S.C. 5753(a), in order to pay relocation

bonuses. One agency requested that an exception be added for a facility

that is closing. We have not adopted this suggestion. If a facility

closes, employees of that facility who relocate to other positions are

typically in various occupations and move to positions in various

locations, including locations in the same commuting area. We believe

this situation requires approval on a case-by-case basis because the

positions in various occupations and locations to which these employees

move may or may not meet the ``difficult-to-fill'' requirement in law

and may or may not be in a different commuting area. A relocation bonus

may be paid only to an employee who must relocate to accept a position

in a different commuting area, and the employee must establish

residence in the new commuting area before the bonus may be paid. (See

Secs. 575.201 and 575.205(c).)

Another agency requested an exception to the requirement for case-

by-case approval on the basis of category during a reorganization. We

have not adopted this suggestion because specificity is required to

determine whether the position in a new commuting area to which an

employee is moving is a position that is difficult to fill. Therefore,

case-by-case approval is necessary.

Definition of ``Employee''

An agency commented that the definition of ``employee'' for

purposes of relocation bonuses should include the phrase ``without a

break in service.'' We agree and have revised the definition

accordingly.

Service Agreement

An agency commented that, as in the case of recruitment bonuses, a

minimum service agreement of 6 months also should be required for

payment of a relocation bonus. We have not adopted this suggestion. The

regulations already include a provision in Sec. 575.206 allowing

agencies to determine any length of time to be appropriate for a

service agreement in the case of a relocation bonus paid for a

temporary change in duty station. A 6-month minimum requirement would

be more restrictive. Agencies, of course, may include criteria for

establishing time periods in the agency plan for relocation bonuses.

Candidate Quality

An agency commented that the term ``high-quality employee'' should

not be removed. We have not adopted this suggestion for the same

reasons discussed above for recruitment bonuses.

Retention Allowances

Reason for Being Likely to Leave

Three agencies expressed concern that allowing retention allowances

to be paid to employees who would leave the Federal service for any

reason, including retirement, could be subject to abuse. We believe the

previous provision that allowed payment only to employees who leave the

Federal service for other employment was too narrow and that additional

flexibility is warranted. An agency may limit the circumstances under

which a retention allowance may be paid in the criteria in the agency's

plan for payment of retention allowances.

One agency expressed concern that the proposed changes in the

retention allowance regulations could lead to costly competition among

Federal agencies. This is not the case, since the regulations continue

to restrict payment of a retention allowance to employees who would

otherwise leave the Federal service. Therefore, a retention allowance

may not be paid to an employee who would leave one Federal agency to go

to another Federal agency. A second agency commented that the

regulations should allow payment of a retention allowance to an

employee who is leaving for another Federal agency. A third agency

commented that the regulations should allow payment of a retention

allowance by an agency that is closing to an employee who would

otherwise leave for another Federal agency, if the closing agency needs

to retain the employee until the closure date because the employee's

leaving would create an undue disruption in an essential function of

the closing agency. We have not adopted these suggestions because we

must be cognizant of the needs of every agency and do not believe it

would be desirable to allow Federal agencies to enter into bidding

wars.

An agency suggested that payment of a retention allowance to an

employee who is planning to leave for retirement should be limited to 1

year because this would allow time for management to find a

replacement. We have not included this limitation in the regulations

because agencies already are authorized to limit the circumstances

under which a retention allowance may be paid as a part of their own

retention [[Page 33325]] allowance plans. Also, as required by

Sec. 575.306(c), agencies must review each determination to pay a

retention allowance at least annually. To continue payment of a

retention allowance, the conditions giving rise to the original

determination to pay the allowance must still exist.

In view of the change allowing payment of a retention allowance

when an employee would leave the Federal Government for a reason other

than employment, an agency commented that, for consistency, we should

remove a phrase in Sec. 575.305(c)(1) referring to employment. We agree

and have removed the phrase.

Aggregate Limitation

One agency commented that payment of a retention allowance should

be allowed even if it would cause an employee's aggregate compensation

to exceed the aggregate limit (level I of the Executive Schedule) at

the end of the calendar year. We have not adopted this suggestion. The

requirement in Sec. 575.306(b) prohibiting authorization of a retention

allowance that would cause the aggregate compensation of an employee to

exceed the rate payable for level I of the Executive Schedule was

established (1) to prevent accumulation of large amounts that would be

carried over from one calendar year to the next and paid only upon

separation or death, thus potentially obligating the expenditure of

appropriated funds for several years in advance, and (2) because

accumulation of a large amount that would be payable in a lump sum upon

separation could be an incentive for an employee to leave.

Miscellaneous

Executive Order 12944 of December 29, 1994, deleted the San

Francisco-Oakland-San Jose, CA Consolidated Metropolitan Statistical

Area (CMSA) as an interim geographic adjustment area because locality

pay rates implemented in January 1995 for the San Francisco CMSA are

greater than interim geographic adjusted rates for 1995. Therefore, OPM

is removing the San Francisco CMSA from the definition of interim

geographic adjustment area in Sec. 531.101.

Waiver of Notice of Proposed Rule Making and Delay in Effective Date

Pursuant to 5 U.S.C. 553(b)(3)(B) and 5 U.S.C. 553(d)(3), I find

that good cause exists for waiving the general notice of proposed

rulemaking for the rule in 5 CFR 531.101 and making this rule effective

retroactively. Executive Order 12944 of December 29, 1994, deleted the

San Francisco-Oakland-San Jose, CA Consolidated Metropolitan

Statistical Area as an interim geographic adjustment area effective on

the first day of the first applicable pay period beginning on or after

January 1, 1995. The amendment to 5 CFR 531.101 is being made effective

on the effective date of the Executive order.

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 will not have a significant

economic impact on a substantial number of small entities because they

will apply only to Federal agencies and employees.

List of Subjects in 5 CFR Parts 531 and 575

Government employees, Law enforcement officers, Wages.

U.S. Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM is amending parts 531 and 575 of title 5 of the

Code of Federal Regulations as follows:

PART 531--PAY UNDER THE GENERAL SCHEDULE

1. The authority citation for part 531 is revised to read as

follows:

Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-

89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, February 4, 1991, 3

CFR, 1991 Comp., p. 316;

Subpart A also issued under 5 U.S.C. 5304, 5305, and 5553;

section 302 of the Federal Employees Pay Comparability Act of 1990

(FEPCA), Pub. L. 101-509, 104 Stat. 1462; and E.O. 12786, 56 FR

67453, December 30, 1991, 3 CFR 1991 Comp., p. 376;

Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), and

7701(b)(2);

Subpart C also issued under 5 U.S.C. 5304, 5305, and 5553;

sections 302 and 404 of FEPCA, Pub. L. 101-509, 104 Stat. 1462 and

1466; and section 3(7) of Pub. L. 102-378, 106 Stat. 1356;

Subpart D also issued under 5 U.S.C. 5335(g) and 7701(b)(2);

Subpart E also issued under 5 U.S.C. 5336;

Subpart F also issued under 5 U.S.C. 5304, 5305(g)(1), and 5553;

and E.O. 12883, 58 FR 63281, November 29, 1993, 3 CFR 1993 Comp., p.

682.

2. In Sec. 531.101, the definition of interim geographic adjustment

area is revised to read as follows:

Sec. 531.101 Definitions.

* * * * *

Interim geographic adjustment area means either of the following

Consolidated Metropolitan Statistical Areas (CMSA's), as defined by the

Office of Management and Budget (OMB):

(a) New York-Northern New Jersey-Long Island, NY-NJ-CT-PA; or

(b) Los Angeles-Riverside-Orange County CA.

* * * * *

PART 575--RECRUITMENT AND RELOCATION BONUSES; RETENTION ALLOWANCES;

SUPERVISORY DIFFERENTIALS

3. 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,

February 1, 1991, 3 CFR, 1992 Comp. p. 316.

4. 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 the

annual rate of basic pay to a newly appointed employee, provided there

is a determination that, in the absence of such a bonus, difficulty

would be encountered in filling the position.

5. In Sec. 575.103, the definitions of employee and newly appointed

are revised to read as follows:

Sec. 575.103 Definitions.

* * * * *

Employee means--

(a) An employee in or under an agency who is newly appointed; or

(b) An individual not yet employed who has received a written offer

to be newly appointed and has signed a written service agreement in

accordance with Sec. 575.106 prior to payment of the recruitment bonus.

* * * * *

Newly appointed refers to--

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

the Federal Government; or

(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 under the Student Educational Employment Program

under Sec. 213.3202;

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

this chapter;

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

short-term temporary appointing authority;

(4) Employment under a provisional appointment designated under

[[Page 33326]] Sec. 316.403 if the new appointment is permanent and

immediately follows the provisional appointment; or

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

time nor the principal employment of the candidate.

* * * * *

6. 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 the 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;

* * * * *

7. Section 575.105 is revised to read as follows:

Sec. 575.105 Payment of recruitment bonus.

A recruitment bonus shall be calculated as a percentage of the

employee's annual rate of basic pay (not to exceed 25 percent) and paid

as a lump sum. It shall not be considered part of an employee's rate of

basic pay for any purpose.

8. 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.

9. 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.

10. 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 the

annual rate 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 filling the position.

11. 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

without a break in service to a position in a different commuting area

or whose duty station is changed permanently or temporarily to a

different community 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.

12. 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

waive, for a specified period of time, the case-by-case approval

requirement for any employee whose rating of record is at least Level 3

(``Fully Successful'' or equivalent), when--

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

subject to a mobility agreement, and the head of the 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 the agency is relocated to a

different commuting area, and the head of the 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.

13. In Sec. 575.205, paragraphs (a) and (b) are revised to read as

follows:

Sec. 575.205 Payment of relocation bonus.

(a) A relocation bonus shall be calculated as a percentage of the

employee's annual rate of basic pay and paid as a lump sum. Except as

provided in paragraph (b) of this section, the amount of a relocation

bonus may not exceed 25 percent of the employee's annual rate of basic

pay. It shall not be considered part of an employee's rate of basic pay

for any purpose.

(b) The amount of a relocation bonus may not exceed the greater of

$15,000 or [[Page 33327]] 25 percent of a law enforcement officer's

annual rate of basic pay in the case of--

(1) A law enforcement officer, as defined in Sec. 550.103 of this

chapter, with respect to whom the provisions of chapter 51 of title 5,

United States Code, apply;

(2) A member of the United States Secret Service Uniformed

Division;

(3) A member of the United States Park Police;

(4) A special agent within the Diplomatic Security Service;

(5) A probation officer (referred to in section 3672 of title 18,

United States Code; and

(6) A pretrial services officer (referred to in section 3153 of

title 18, United States Code).

* * * * *

14. 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.

15. 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.

16. In Sec. 575.302, paragraph (c) is revised to read as follows:

Sec. 575.302 Delegation of authority.

* * * * *

(c) The head of an Executive agency may request that OPM authorize

the payment of a retention allowance to one or more categories of

employees of his or her agency not otherwise covered by 5 U.S.C. 5754

or this subpart.

* * * * *

17. 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.

* * * * *

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

follows:

Sec. 575.304 Conditions for payment.

(a) An agency may not begin payment of a retention allowance during

a period of employment established under any service agreement required

by payment of a recruitment bonus under subpart A of this part or

relocation bonus under subpart B of this part. After retention

allowance payments have commenced, a relocation bonus may be paid

without affecting the payment of a retention allowance.

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

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

* * * * *

19. In Sec. 575.305, paragraph (c)(1) is revised to read as

follows:

Sec. 575.305 Agency retention allowance plans; higher level review and

approval; and criteria for payment.

* * * * *

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

subpart shall be based on a written determination that the unusually

high or unique qualifications of the employee or a special need of the

agency for the employee's services makes it essential to retain the

employee and that, in the absence of such an allowance, the employee

would be likely to leave the Federal service.

* * * * *

20. 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 or 5552.

21. 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. 95-15713 Filed 6-27-95; 8:45 am]

BILLING CODE 6325-01-M