[Federal Register: June 18, 2008 (Volume 73, Number 118)]
[Notices]
[Page 34800-34808]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jn08-129]
=======================================================================
-----------------------------------------------------------------------
OFFICE OF PERSONNEL MANAGEMENT
Proposed Personnel Demonstration Project; Performance-Based Pay
Adjustments in the Department of Veterans Affairs
AGENCY: U.S. Office of Personnel Management.
ACTION: Notice of a proposed demonstration project plan.
-----------------------------------------------------------------------
SUMMARY: Chapter 47 of title 5, United States Code, authorizes the U.S.
Office of Personnel Management (OPM), directly or in agreement with one
or more agencies, to conduct demonstration projects that experiment
with new and different human resources management concepts to determine
whether changes in human resources policy or procedures would result in
improved Federal human resources management. The Department of Veterans
Affairs (DVA) and OPM propose to test a performance-based pay system
with open pay ranges linked to the corresponding minimum and maximum
rates for the grades of the General Schedule pay structure. Section
4703 of title 5 requires OPM to publish the proposed project plan in
the Federal Register . This notice fulfills that requirement. The
proposed project plan has been approved by DVA and OPM.
DATES: Written comments must be submitted on or before July 18, 2008. A
public hearing on the proposed project plan is scheduled for Tuesday,
August 5, 2008, and will begin at 10 a.m. Eastern Standard Time. The
location of the hearing is: U.S. Department of Veterans Affairs, 810
Vermont Avenue, NW., Washington DC 20420.
Public parking is limited, but the building is conveniently
accessible to the ``McPherson Square'' Metro station. This is a secure
facility. Members of the public must show a government-issued photo ID
(e.g., State driver's license). Attendees will undergo electronic
screening, and their personal belongings will be subject to a physical
search. Personal items prohibited include devices that can transmit and
record, weapons (guns, knives, explosives, etc.), and alcohol. A member
of the public possessing such items will be barred from entering, and
such items are subject to confiscation. There will be a sign-in table
set up in the main lobby. A greeter, and signs, will direct attendees
to the main auditorium location.
There will be a telephone call-in number for members of the public
who cannot attend in person. That number will be 1-800-767-1750 (access
code 28773), and the line will be active from 10 a.m. until
the hearing is adjourned.
At the time of the hearing, interested persons or organizations may
present their written or oral comments on the proposed demonstration
project. The hearing will be informal. However, anyone wishing to
testify should contact the person listed under FOR FURTHER INFORMATION
CONTACT, so that DVA and OPM can plan the hearing and provide
sufficient time for all interested persons and organizations to be
heard. Priority will be given to those on the schedule, with others
speaking in any remaining available time. Each speaker's presentation
will be limited to 10 minutes. Written comments may be submitted to
supplement oral testimony during the public comment period.
ADDRESSES: Comments may be mailed to Demonstration Projects, U.S.
Office of Personnel Management, 1900 E Street, NW., Room 7456,
Washington, DC 20415 or submitted by email to Demoprojects@opm.gov.
FOR FURTHER INFORMATION CONTACT: (1) Department of Veterans Affairs:
Lauren Kuiper-Rocha, Demonstration Project Leader, Office of Human
Resources Management (055), (202) 461-7804, VA Central Office, 810
Vermont Avenue, NW., Washington, DC 20420; (2) Office of Personnel
Management: Patsy Stevens, Systems Innovation Group Manager, (202) 606-
1574, U.S. Office of Personnel Management, 1900 E Street,
[[Page 34801]]
NW., Room 7456, Washington, DC 20415.
SUPPLEMENTARY INFORMATION: The goal of this demonstration project is to
make employees' pay increases more performance-sensitive, so that only
Fully Successful or better performers will receive any pay adjustments
and the best performers will receive the largest pay adjustments.
Linda M. Springer,
Director.
Table of Contents
I. Executive Summary
II. Introduction
A. Purpose
B. Problems With the Present System
C. Changes Required/Expected Benefits
D. Participating Organizations
E. Participating Employees
F. Project Design
III. Personnel System Changes
A. Performance Appraisal
B. Program Requirements
C. Supervisory Accountability
D. Reconsideration of Ratings
E. Open-Range Pay System
1. Elimination of Fixed Steps
2. Rate Range
3. Pay Administration
F. Performance-based Pay Adjustments
1. Pay Pools
2. Performance Shares
3. Pay Adjustments
4. Employees Who Do Not Receive a Pay Adjustment
5. Locality Pay and Special Rate Supplement
IV. Training
V. Conversion
A. Conversion to the Demonstration Project
B. Conversion to the General Schedule
VI. Project Duration
VII. Project Evaluation
VIII. Costs
IX. Waiver of Laws and Regulations Required
A. Title 5, United States Code
B. Title 5, Code of Federal Regulations
I. Executive Summary
This project was designed by DVA in consultation with OPM. The
demonstration project will modify the General Schedule pay system by
eliminating fixed steps within each grade and providing for annual pay
adjustments based on performance. The proposed project will test the
application of meaningful distinctions in levels of performance to the
allocation of annual pay increases under the General Schedule.
II. Introduction
A. Purpose
The purpose of the proposed project is to modify the General
Schedule (GS) pay system to provide larger annual pay increases to
employees who are better performers based on performance distinctions
made under a credible, strategically-aligned performance appraisal
program and thereby improve the results-oriented performance culture
within the organization. The proposed project provides no pay increase
to any participant rated below the Fully Successful performance level.
B. Rationale for a New System
The current GS pay system provides annual pay increases to all
employees, even those whose performance is less than Fully Successful.
Similarly, periodic within-grade pay increases are virtually automatic.
Although an employee's performance must be determined to be at an
``acceptable level of competence'' in order for the employee to receive
a within-grade increase (WGI), this is only a single-level threshold
and no further distinctions in levels of performance play a role. All
performance levels above the threshold are treated the same for
purposes of determining the amount of the increase and the rate at
which an employee advances through the rate range of his or her grade.
DVA and OPM believe that a more prudent use of the limited resources
available to compensate Federal employees is to adjust the pay system
to make pay more sensitive to performance.
The current GS pay system does provide some tools to address
distinctions in levels of performance--namely, quality step increases
(QSIs) and awards based upon performance. QSIs are discretionary
adjustments that are not integrated into the normal pay adjustment
process; thus, limited funds are available to provide QSIs, and the
decision-making process may not be very transparent. In addition, there
is no flexibility as to the amount of the QSI; a full step increase is
required. Also, QSIs may be used only for those with the highest rating
of record. In summary, QSIs alone cannot be relied upon to establish an
effective link between pay and performance based on meaningful
distinctions among different levels of performance.
As the discussion above reveals, the General Schedule has somewhat
limited options for the purposes of establishing a more results-
oriented performance culture. DVA would like to use the Human Capital
Assessment and Accountability Framework (HCAAF) to make its system more
performance-sensitive. Within the HCAAF, a results-oriented performance
culture effectively plans, monitors, develops, rates, and rewards
employee performance, consistent with the merit system principle that
``appropriate incentives and recognition should be provided for
excellence in performance'' (5 U.S.C. 2301(b)(3)).
C. Changes Required/Expected Benefits
The proposed demonstration project responds to the limitation
identified above by eliminating the 10 fixed steps within each of the
15 GS grades and by making annual GS pay adjustments performance-
sensitive. Pay adjustments will be funded from a pay pool consisting of
the amounts that would otherwise be used to pay the annual GS pay
adjustment, WGIs, and QSIs to employees covered by the demonstration
project. A share mechanism will be used to allocate pay increases among
employees with different levels of performance. Implementation of the
proposed pay system will result in larger pay increases going to
employees who demonstrate higher performance. By regularly rewarding
better performance with better pay, the participating organization will
strengthen the results-oriented performance culture. Among other
things, they will be better able to retain their good performers and
recruit new ones.
D. Participating Organizations
The Department of Veterans Affairs is committed to operating robust
performance appraisal programs aligned to the organization's strategic
goals and objectives. The Department of Veterans Affairs Veterans
Health Administration (VHA) will be participating in the demonstration
project. DVA is committed to providing the training and resources that
will be needed to make performance management programs highly
effective.
E. Participating Employees
The demonstration project will cover all GS employees in the GS-
0670 Health Systems Administrator series at the GS-14/15 grade levels
who are organizationally titled Assistant Medical Center Director,
Associate Medical Center Director, and Deputy Network Director. Table 1
shows the number of employees to be covered by the project by
occupational series and grade.
[[Page 34802]]
Table 1.--Covered Employees, by Occupational Series and Grade
--------------------------------------------------------------------------------------------------------------------------------------------------------
Grade
Series -----------------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
--------------------------------------------------------------------------------------------------------------------------------------------------------
0670............................ ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... 52 98
Total....................... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... 52 98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Management has provided initial notice to affected employees and
will continue consultation throughout project implementation.
F. Project Design
The project has been designed simply to ensure that no
participating employee with a rating of record of less than Fully
Successful will receive a pay increase and that funds available for pay
adjustments will be allocated on the basis of performance.
III. Personnel System Changes
A. Performance Appraisal
DVA recognizes the importance of maintaining highly credible
performance management systems. DVA will use a performance appraisal
program under the Department of Veterans Affairs appraisal system that
has been approved by OPM consistent with chapter 43 of title 5, United
States Code. Throughout the duration of the demonstration project, the
effectiveness of performance management within the project will be
monitored by examining metrics and assessments that OPM and agencies
generally apply to performance management systems and programs.
1. Program Requirements
The performance appraisal program, which is established under
chapter 43 of title 5, United States Code, requires written performance
plans for each covered employee containing the employee's performance
elements and standards. The performance plan links the performance
elements and standards for individual employees to the organization's
strategic goals and objectives. Ongoing feedback and dialogue between
employees and their supervisors regarding performance is required. In
addition, the program provides for, at a minimum, one mid-year progress
review.
The appraisal program, including its performance levels and
standards, provides for making meaningful distinctions in performance.
The program uses the following levels for official ratings of record:
Outstanding, Excellent, Fully Successful, Minimally Satisfactory, and
Unsatisfactory. Employees must be covered by their performance plan for
at least 90 days before they can be assigned a rating of record.
Supervisors and managers apply the program to make appropriate ratings.
Ratings given accurately reflect actual performance, and are linked, to
the extent appropriate, to overall organizational performance. As a
consequence, actual distinctions in levels of performance become
apparent from the ratings given out. Employees receive a written
performance appraisal (i.e., a rating of record) annually. There will
be no forced distribution of ratings. Each annual appraisal period will
begin on October 1 and end on the following September 30. Performance
appraisals will be completed in a timely manner to support pay
decisions in accordance with section III.C below.
2. Supervisory Accountability
Supervisors are responsible for providing appropriate consequences
for employee performance by addressing poor performance and recognizing
exceptional performance. Performance elements for supervisors and
managers include the degree to which supervisors and managers plan,
assess, monitor, develop, correct, rate, and reward subordinate
employees' performance. It is recognized that specific training may be
provided to prepare supervisors and managers to exercise these
responsibilities.
3. Reconsideration of Ratings
To support fairness and transparency for the system and its
consequences, employees have an opportunity to request formal
reconsideration of a rating of record by a management official at the
next level above the official who decided the rating. Requests for
reconsideration must be in writing and be submitted no more than 15
calendar days after the official rating of record has been communicated
to the employee. The request shall state the employee's reasons as to
why the rating of record should be changed. The management official
above the deciding official will discuss the request with the employee
within 10 calendar days after receipt and provide a written response.
If the employee is not satisfied with the decision of the higher level
official the employee may then further request a secondary
reconsideration of the rating to the management official at the
respective next higher level in the organization. This second level
reconsideration must be submitted in writing to the management official
at the respective next higher level in the organization within 10
calendar days of the receipt of the decision provided by the management
official above the deciding official. This higher level official
reviewing the secondary reconsideration will make the final decision
after full consideration of the record, including any relevant
information or pleading submitted by the employee, within 15 work days
after receipt and provide the response in writing. The decision by this
official will be the final administrative decision in the matter.
If the reconsideration of the appraisal results in a different
rating of record, the revised rating of record will become the basis
for the employee's pay adjustment(s) in accordance with section III.C
below. If the adjustment occurs after all pay deliberations have been
finalized, it does not result in a recalculation of other employees'
pay adjustments.
The reconsideration request procedures outlined above do not apply
to employees who receive a rating of Unsatisfactory. Rather, the
employee's right to a review of an Unsatisfactory rating by an official
higher than the approving official will occur in conjunction with the
employee's right to appeal or grieve a subsequent personnel action
based on the Unsatisfactory rating, such as a reassignment, demotion or
removal from Federal service. Therefore, the employee's right to
request reconsideration of the rating will occur within the right to
file an agency grievance (in the case of a reassignment) or a statutory
appeal right (in the case of a demotion or removal) and will be in lieu
of the reconsideration request procedures outlined above.
B. Open-Range Pay System
Employees will continue to be covered by the 15-grade GS position
classification system established under 5 U.S.C. chapter 51; however,
the GS pay system established under 5 U.S.C. chapter 53, subchapter
III, will be
[[Page 34803]]
modified as described in the following sections. Except as otherwise
provided in this plan, demonstration project employees will be
considered to be GS employees in applying other laws, regulations, and
policies.
1. Elimination of Fixed Steps
The 10 fixed steps of each GS grade will not apply to employees
participating in the demonstration project. The fixed-step system was
designed to reward longevity. An open-range pay system is an important
element of any effort to make pay more performance-sensitive. No
employee's pay will be reduced as a result of becoming covered by the
demonstration project. However, demonstration project employees will no
longer receive longevity-based, within-grade pay increases at
prescribed intervals. Instead, they will be granted annual performance
adjustments as described in section III.C below.
2. Rate Range
The normal minimum and maximum rates of the rate range for each
grade will equal the applicable step 1 rate and step 10 rate,
respectively, in the General Schedule.
For employees with a rating of record below Fully Successful, the
minimum rate of the range is extended 5 percent below the normal
minimum rate. An employee's rate may fall below the normal range
minimum when that minimum increases as a result of a rate range
adjustment, but the employee cannot receive a pay adjustment because
the employee's rating of record is below Fully Successful, as described
in section III.C.4 below.
For employees with a rating of record at the highest level
(Outstanding), the maximum rate of each range is extended 5 percent
above the normal maximum rate. This feature will help ensure that the
range of available pay rates will be adequate to recognize truly
outstanding performance. If an employee within this range extension
receives a rating of record below Outstanding, special provisions
apply, as described in section III.B.3 below.
3. Pay Administration
Performance-based pay adjustments described in section III.C below
will be made to the rate of basic pay. These adjustments are scheduled
to be made on the same date that annual rate range adjustments normally
take effect--i.e., the first day of the first pay period beginning on
or after January 1.
Locality-based comparability payments under 5 U.S.C. 5304 and
special rate supplements under 5 U.S.C. 5305, as applicable, will be
paid on top of the rate of basic pay in the same manner as those
payments apply to other GS employees, except as otherwise provided in
this plan. An adjusted rate cap 5 percent higher than the normal EX-IV
cap is established to accommodate those Outstanding performers in the 5
percent upper rate range extension. This higher cap will apply only to
employees receiving a rate within the upper range extension. If the
locality rate for an employee at the normal grade maximum is affected
by the EX-IV cap, resulting in an ``effective locality pay percentage''
that is less than the regular locality pay percentage, the locality
rate for an employee in the upper rate range extension of the same
grade will be computed using that same effective locality pay
percentage. (For example, if the regular locality pay percentage is 30
percent, but the EX-IV cap causes the amount of locality pay actually
received by an employee at the normal grade maximum to be 20 percent,
that effective locality pay percentage of 20 percent would be used to
compute locality pay for an employee in the upper range extension of
the same grade. Similarly, if the special rate supplement-adjusted rate
for an employee at the normal grade maximum is affected by the EX-IV
cap, resulting in an ``effective special rate supplement percentage''
that is less than the regular special rate supplement percentage, the
adjusted rate for an employee in the upper rate range extension of the
same grade will be computed using that same effective special rate
supplement percentage.)
Subject to guidance provided by OPM, DVA will establish pay
administration rules for determining an employee's rate of pay upon
initial appointment, promotion, demotion, transfer, reassignment, or
other position change. In addressing geographic conversions and
simultaneous pay actions, such rules must be consistent with 5 CFR
531.205 and 5 CFR 531.206, respectively.
Upon promotion, an employee is entitled to an increase of 8
percent, or a higher increase as necessary to set the employee's rate
at the normal minimum of the range for the higher grade. DVA may
establish exceptions to this policy to deal with employees receiving a
retained rate, employees who are re-promoted shortly after a demotion,
employees with exceptional performance warranting a larger increase
with higher management approval, etc.
The grade retention provisions in 5 U.S.C. 5362 and 5 CFR part 536
continue to be applicable. The pay retention rules in 5 U.S.C. 5363 and
5 CFR part 536 apply to demonstration project employees, subject to the
following exceptions:
(1) An employee with a rating of record below Fully Successful may
not receive an increase in his or her retained rate under the 50-
percent adjustment rule in 5 U.S.C. 5363(b)(2)(B);
(2) The cap on retained rates is equal to the rate for level IV of
the Executive Schedule plus 5 percent (instead of the EX-IV cap
established in 5 CFR 536.306) in order to accommodate the upper range
extension;
(3) An employee in the upper range extension who is rated below
Outstanding will be converted to a retained rate before processing any
other pay action; and
(4) The range maximum rate used in computing retained rate
adjustments under the 50-percent adjustment rule will be the maximum
rate of the highest applicable rate range (including any applicable
locality payment or special rate supplement) taking into consideration
an employee's rating of record. For retained rate employees rated
Outstanding, the increase is 50 percent of the dollar change in the
applicable adjusted rate for the upper range extension maximum. (Note
that an employee rated Outstanding must have a retained rate in excess
of the upper range extension maximum adjusted rate, since he or she
would otherwise be converted to a rate within that range extension.)
For retained rate employees rated below Outstanding, the increase is 50
percent of the dollar change in the applicable adjusted rate for the
normal grade maximum.
If an employee is receiving a retained rate that is less than the
applicable adjusted maximum rate (including any applicable locality
payment or special rate supplement) for the upper range extension for
the employee's grade, and if that employee receives a rating of record
of Outstanding, the employee's retained rate will be terminated and
converted to an equal adjusted rate (base rate in upper range extension
plus applicable locality payment or special rate supplement). This
conversion must be processed before any other pay adjustment.
For a retained rate employee with a rating of record of
Outstanding, if a retained rate increase provided at the time of a
range adjustment results in the retained rate falling below the
applicable adjusted rate for the upper range extension maximum, the
employee's retained rate will be terminated, and the employee's pay
will be set at the maximum rate of the upper range extension.
[[Page 34804]]
For a retained rate employee with a rating of record of Fully
Successful or Excellent, if a retained rate adjustment provided at the
time of a range adjustment results in the retained rate falling below
the applicable adjusted rate for the normal grade maximum, the
employee's retained rate will be terminated, and the employee's pay
will be set at the normal grade maximum rate.
For a retained rate employee with a rating of record below Fully
Successful, the retained rate is frozen and not subject to adjustment.
When such an employee's retained rate falls below the applicable
adjusted rate for the normal grade maximum, the employee's retained
rate will be terminated, and the employee's pay will be set at an
adjusted rate equal to the retained rate (i.e., the rate is not set at
the range maximum).
As required by 5 CFR 536.304(a)(2) and 536.305(a)(2), any general
pay adjustment, including a retained rate adjustment as described in
the preceding paragraphs, must be processed before any other
simultaneous pay action (such as a geographic pay conversion).
When applicable, the saved pay rules in 5 U.S.C. 3594 and 5 CFR
359.705 for former SES members continue to apply to demonstration
project employees, except that (1) an employee with a rating of record
below Fully Successful may not receive an increase in his or her saved
rate under 5 U.S.C. 3594(c)(2); and (2) the 50-percent adjustment rule
must be applied in the same manner as it is applied for a retained rate
under 5 U.S.C. 5363, subject to the modifications described in the
preceding paragraphs. The rules regarding termination of a saved rate
when it falls below the applicable adjusted maximum rate must be
parallel to those governing termination of a retained rate under 5
U.S.C. 5363, subject to the modifications described in the preceding
paragraphs.
An employee's rate of basic pay may not exceed the normal maximum
rate for the employee's grade unless the employee is receiving a
retained rate under 5 U.S.C. 5363, a saved rate under 5 U.S.C. 3594, or
is entitled to a rate within the upper range extension for employees
with an Outstanding rating of record, as provided under section
III.B.2. An employee's rate of basic pay may not be below the normal
minimum rate for the employee's grade unless the employee's most recent
rating of record is below Fully Successful.
C. Performance-Based Pay Adjustments
1. Pay Pools
Funds that otherwise would be spent on the across-the-board GS pay
adjustment, WGIs, and QSIs for demonstration project employees will
instead be placed into a pay pool, which will be used to fund annual
performance-based pay increases for those employees whose rating of
record is Fully Successful or higher. A share mechanism will be used
(1) to ensure that employees with higher ratings of record receive
greater pay increases than employees with lower ratings and (2) to
control costs without resorting to a forced distribution of ratings.
Each employee will be assigned a certain number of shares, based on his
or her rating of record in accordance with section III.C.2 below. All
employees in the normal rate range whose rating of record is at least
Fully Successful will receive an adjustment equal to at least the
amount of the annual GS base pay comparability increase under 5 U.S.C.
5303. Employees with a rating of record below Fully Successful will not
receive any pay adjustment.
DVA will establish one or more pay pools for allocating performance
pay increases. DVA will determine which participating employees are
covered by any pay pool and determine the dollar value of each pay
pool. In setting the value of pay pools, at a minimum DVA will allocate
an amount for performance pay increases equal to the estimated value of
the WGIs, QSIs, and annual GS pay adjustments that otherwise would have
been paid to participating employees. In computing the estimated value
of WGIs and QSIs, DVA may use estimated Governmentwide averages as
computed by the Office of Personnel Management.
2. Performance Shares
DVA will establish rating/share patterns for each pay pool--that
is, the relationship between a rating of record and a single number of
shares. The DVA health care system is characterized by a dynamic
employment environment, and thus DVA will use two sets of rating/share
patterns based on the Veterans Health Administration's 2005 Facility
Complexity Model.
The Veterans Health Administration's 2005 Facility Complexity Model
assigns DVA Medical Centers into three complexity levels; one level
contains two subcomponent levels. The complexity levels are based on a
cumulative score in regard to seven individual variables, including but
not limited to, complexity of intensive care units, availability of
sub-specialty services, diversity of residency training programs, and
scope of research programs. The positions of Deputy Network Director
and those Assistant Medical Center Directors and Associate Medical
Center Directors assigned to a complexity level 1a facility deal with
the highest level of patient complexity, teaching, and research, and
their facilities have the greatest number and breadth of clinical
specialists, as well as the most intensive care units.
In order to distinguish the higher degree of complexity the number
of shares for each rating level for the positions of Deputy Network
Director and Assistant Medical Center Director and Associate Medical
Center Director at a complexity level 1a facility will initially be as
follows: 4.5 shares are assigned to the Outstanding rating, 3.5 shares
to the Excellent rating, 2 shares to the Fully Successful rating, and 0
shares to a less than Fully Successful rating. The number of shares for
each rating level for the positions of Assistant Medical Center
Director and Associate Medical Center Director at complexity level 1b,
1c, 2, and 3 facilities will initially be as follows: 4 shares are
assigned to the Outstanding rating, 3 shares to the Excellent rating, 2
shares to the Fully Successful rating, and 0 shares to a less than
Fully Successful rating.
DVA may revise the rating/share pattern in coordination with OPM,
and after giving affected employees advanced notice. Employees will be
informed in writing at least 180 days before the end of the appraisal
period of any decision by DVA to change the rating/share pattern. No
shares may be assigned to any rating of record below Fully Successful,
since no pay increase is payable to employees with such a rating of
record. After the ratings of record and shares are assigned to
employees, the value of a single share can be calculated.
3. Pay Adjustments
In general: DVA will determine the value of one performance share,
expressed as a percentage of the employee's rate of basic pay, based on
the value of the pay pool and the distribution of shares among pay pool
employees. An individual employee's performance payout percentage is
determined by multiplying the determined value of a performance share
by the number of shares assigned to the employee. On the first day of
the first pay period beginning on or after January 1 of each year, this
amount must be paid as an increase in the employee's rate of basic pay,
but only to the extent that it does not cause the
[[Page 34805]]
employee's rate to exceed the applicable maximum of the employee's rate
range. Notwithstanding the preceding sentence, employees in the upper
range extension rated below the highest level are subject to special
rules as described in section III.B.2 and III.B.3. above. At the
discretion of the Secretary or the Secretary's designee, any portion of
the employee's performance payout amount not delivered as a basic pay
increase may be paid out as a lump sum (with no charge to the pay
pool). Such a lump-sum payment is not basic pay for any purpose and is
not a cash award under chapter 45 of title 5, United States Code.
Special rules apply to retained rate employees as described later in
this section.
An employee with a rating of record of Fully Successful or higher
may not receive a performance payout that is less than the percentage
value of any simultaneous rate range adjustment, except for (1) an
employee receiving a retained rate and (2) an employee in the upper
range extension with a rating of record of Fully Successful or
Excellent who is converted to a retained rate (as provided in sections
III.B.2 and III.B.3 above). This guaranteed amount will be used in
place of any lower performance payout resulting from the share
methodology. Any additional costs of using the guaranteed amount will
be funded outside the pay pool. Otherwise, the guaranteed amount is
applied in the same manner as the regular performance payout.
The rating period of an employee who has been in the position less
than 90 days as of September 30 will be extended and a rating of record
completed after the employee has performed at least 90 days under the
employee's performance plan. Performance payouts resulting from
extended rating periods will be funded outside the pay pool and will be
effective prospectively. Those payouts may be prorated to take into
account the fact that an employee had less than a full year under the
performance plan.
DVA may establish policies on prorating the performance pay
increases and/or lump-sum payments for an employee who, during the
period between annual pay adjustments, was (1) hired or promoted, (2)
in an approved leave status, (3) on a part-time work schedule, or (4)
in other circumstances that make proration appropriate. Such proration
policies will provide each eligible employee with the full percentage
adjustment used to adjust base rate ranges (if any) and may prorate any
additional amount of performance pay increase that would be applicable
to the employee.
If an employee's rating of record that is the basis for a
performance payout is retroactively revised (after the regular
effective date of performance payouts) through a reconsideration or
appeals process, the employee's performance payout must be
retroactively recomputed using the share value as originally
determined. Any such retroactive corrections are not funded out of the
pay pool and do not affect the performance payouts provided to other
employees in the pay pool. In setting the size of a future pay pool,
management will take into account past and projected corrections.
Special provisions for employees returning to duty after an
extended period of service in the uniformed services or in receipt of
workers' compensation benefits: Special pay-setting provisions apply to
employees who were not able to perform under the performance plan for
at least 90 days (including an opportunity for an extended rating
period) and who are returning to duty status after a period of leave or
separation during which the employee was (1) serving in the uniformed
services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102) with legal
restoration rights (e.g., 38 U.S.C. 4316), or (2) receiving workers'
compensation benefits under 5 U.S.C. chapter 81, subchapter I. In these
cases, DVA will determine the employee's prospective rate of basic pay
upon return to duty by making performance pay adjustments for the
intervening period based on the last DVA rating of record for the
returning employee if the last DVA rating of record is dated within 2
years of the employee's date of return to duty. If there is no previous
DVA rating of record, as described, the employee will have pay set
prospectively by applying the percentage increase equivalent to an
Excellent rating. The performance pay increases during the intervening
period may not be prorated based on periods covered by this provision.
In addition, a performance pay increase that is effective after the
employee's return to duty may not be prorated based on periods covered
by this provision. A lump-sum payment for a period including actual
service performed after the employee's return to duty must be prorated
(based on service covered by this provision) under the same agency
proration policies that apply generally to periods of leave.
Special provision for employees receiving a retained rate of basic
pay: An employee receiving a retained rate under 5 U.S.C. 5363 or 5
U.S.C. 3594 is not eligible for a basic pay increase, except in
conjunction with (1) a rate range adjustment, as described in section
III.B.3 above; or (2) a geographic conversion under 5 CFR 359.705(e) or
536.303(b), as applicable. At the discretion of the Secretary or the
Secretary's designee, a retained rate employee may receive the same
lump-sum payment approved for an employee in the same pay pool who is
at the applicable range maximum and who has the same performance rating
of record and number of shares.
4. Employees Who Do Not Receive a Pay Adjustment
Employees with a rating of record below Fully Successful are
prohibited from receiving a pay increase, except if necessary to
prevent an employee's rate from falling more than 5 percent below the
normal range minimum. When an employee does not receive a pay increase
because of performance below the Fully Successful level, his or her pay
rate may fall below the normal minimum rate of the grade, since that
range minimum may be increasing. However, in no case may an employee's
rate of basic pay fall more than 5 percent below the normal range
minimum.
Each employee who does not receive an increase in basic pay because
his or her performance is less than Fully Successful will be entitled
to be notified promptly in writing of that fact. At the same time, the
employee must be informed in writing of the right to request that the
agency reconsider its determination, under the same procedures
prescribed by OPM regarding the determination not to provide a within-
grade increase under 5 U.S.C. 5335(c). The Merit Systems Protection
Board will process any appeals under this section in the same manner
that it processes appeals under 5 U.S.C.5335(c).
5. Locality Pay and Special Rate Supplement
When a locality-based comparability payment established under 5
U.S.C. 5304 is increased, a demonstration project employee whose most
recent rating of record is below Fully Successful is entitled to the
increased locality payment, but his or her underlying rate of basic pay
will be reduced in a manner that ensures the employee's total rate of
pay does not increase. This reduction is necessary to ensure, in an
administratively feasible way, that an employee rated less than Fully
Successful will not receive a pay increase; it does not constitute a
reduction in pay for purposes of applying the adverse action procedures
in chapter 75 of title 5, United States
[[Page 34806]]
Code. (Exception: An employee's rate of basic pay may not be reduced
under this paragraph to the extent that the reduction would cause an
employee's rate to fall more than 5 percent below the normal range
minimum.)
Similarly, when a special rate supplement established under 5
U.S.C. 5305 is increased, a demonstration project employee whose rating
of record is below Fully Successful is entitled to the increased
supplement, but his or her underlying rate of basic pay will be reduced
in a manner that ensures the employee's total rate of pay does not
increase.
A locality rate and special rate cap 5 percent higher than the
normal EX-IV cap is established to accommodate those Outstanding
performers in the 5 percent upper rate range extension. See section
III.B.3 for additional information.
IV. Training
Training for all involved is essential to the success of the
demonstration project. Training will be provided to employees,
supervisors, and managers before the project is launched and throughout
the life of the project. It is important that employees perceive the
performance management program as fair and transparent; therefore,
supervisors and managers will be trained in the effective management of
performance.
All employees will be trained in the performance appraisal process
and the pay adjustment mechanism. Various types of training are being
considered, including videos, on-line tutorials, and train-the-trainer
concepts.
V. Conversion
A. Conversion to the Demonstration Project
Employees whose positions are converted to the demonstration
project will be converted with no change in their rate of basic pay.
Any simultaneous pay action that was scheduled to take effect under the
GS pay system on the date of conversion must be processed before
processing the conversion to the modified GS pay system. Immediately
after conversion, eligible employees will receive an increase in basic
pay reflecting the prorated value of the next scheduled WGI. The
prorated value is determined by calculating the portion of the time-in-
step an employee has completed towards the waiting period for his or
her next step increase. This within-grade ``buy-in'' adjustment will
not be made for (1) employees who are at the step 10 rate for their
grade immediately before conversion to the demonstration project, (2)
employees who are receiving a retained rate of pay under 5 U.S.C. 5363
or a saved rate under 5 U.S.C. 3594 immediately before conversion to
the demonstration project, or (3) employees whose rating of record is
below Fully Successful. The first performance-based pay increase under
the project's pay adjustment mechanism will be effective on the first
day of the first pay period beginning on or after January 1, 2010.
For employees who enter the demonstration project by lateral
reassignment or transfer (i.e., not by conversion of position), DVA may
apply parallel pay conversion rules, including rules for providing a
prorated adjustment reflecting time accrued toward a GS within-grade
increase or similar within-range adjustment under another pay system.
If conversion into the demonstration project is accompanied by a
geographic move, the employee's pay entitlements under the former pay
system in the new geographic area must be determined before the pay
conversion.
B. Conversion to the General Schedule
If a demonstration project employee is moving to a GS position not
under the demonstration project, or if the project ends and each
project employee must be converted back to a GS position not covered by
the project, the employee's rate of basic pay under the demonstration
project as in effect immediately before conversion will be used in
applying any simultaneous pay actions under the regular GS pay system
that are effective on the date of conversion (e.g., promotion,
geographic movement). If the rate of basic pay falls between steps
after applying any simultaneous pay actions, the employee's rate will
be set at the next higher step.
If a demonstration project employee is receiving a retained rate
immediately before conversion back to the regular GS pay system, the
employee will continue to be entitled to a retained rate upon
conversion, but the retained rate thereafter will be governed by 5
U.S.C. 5363 and 5 CFR part 536 or 5 CFR 359.705, as applicable.
If a demonstration project employee is receiving a rate above the
normal GS rate range because his or her rate is set within the upper
range extension for Outstanding performers and converts to the GS pay
system, that rate must be converted to a retained rate subject to the
rules and limitations in 5 U.S.C. 5363 and 5 CFR part 536.
If a demonstration project employee is receiving a rate below the
normal GS rate range because his or her rate has fallen within the
lower range extension for less than Fully Successful performers, that
rate must be converted to the minimum rate for the grade upon
conversion to the regular GS pay system.
VI. Project Duration
The initial implementation period for the demonstration project
will terminate prior to the end of the 5-year period beginning on the
date which the project takes effect. However, with OPM's concurrence,
the project may be extended, modified or terminated on or before the
expiration of the 5-year period.
VII. Project Evaluation
Section 4703(h) of title 5, U.S.C., requires an evaluation of the
results of the demonstration project. DVA, in coordination with OPM,
will develop a plan to evaluate the demonstration project to determine
the extent to which the pay increases paid to participating employees
reflect meaningful distinctions among their levels of performance.
Workforce data will be analyzed to determine whether the project is
achieving its goal and whether it is resulting in any adverse impact.
Key features of successful performance-based pay systems, including
leadership commitment, communication, stakeholder involvement,
training, planning, mission alignment, and the rewarding of
performance, will be assessed to determine the effectiveness of the
demonstration project and ensure compliance with stated project goals.
The evaluation will address the extent to which the project has
incorporated the elements required by section 1126 of Public Law 108-
136 (5 U.S.C. 4701 note). DVA will be accountable for exercising and
maintaining fiscal responsibility in the execution of the demonstration
project. The project will be examined during each phase of the
evaluation to assess that costs are being managed effectively.
Moreover, cost discipline will be examined during each phase of the
evaluation to ensure spending remains within acceptable limits.
Finally, employee feedback will be sought through surveys, interviews,
and focus groups to assess employee perceptions of the fairness and
integrity of the performance appraisal and pay adjustment processes.
VIII. Costs
A. Buy-in Costs
There will be added costs resulting from the within-grade increase
``buy-in'' provision described in section V above; however, those costs
will be offset by the elimination of within-grade step
[[Page 34807]]
increases that otherwise would have occurred.
B. Recurring Costs
All funding will be provided through the organization's budget. No
additional funding will be requested specifically for this project; all
costs will be charged to available funds through existing
appropriations, including those incurred in the areas of project
development, training, and project evaluation.
IX. Waiver of Laws and Regulations Required
A. Waivers to Title 5, United States Code
Chapter 35, section 3594: Saved pay for former members of the
Senior Executive Service (only to the extent necessary to (1) bar
employees with a rating of record below Fully Successful from receiving
a saved rate increase under 5 U.S.C. 3594(c)(2); and (2) apply rules
parallel to those governing adjustment and termination of retained
rates under 5 U.S.C. 5363, as modified under this plan).
Chapter 53, section 5302(1)(A), (8) and (9): Definitions (only to
the extent necessary to provide that employees under the demonstration
project are not considered to be GS employees for the purposes of
annual adjustments under section 5303 or similar provision of law
governing annual adjustments for employees covered by section 5303).
Chapter 53, section 5303: Annual adjustments to pay schedules.
Chapter 53, section 5304(g)(1): Locality-based comparability
payments (only to the extent necessary to (1) provide a locality rate
may not exceed the rate for EX-IV, plus 5 percent for employees in the
upper range extension; and (2) apply an ``effective'' locality pay
percentage for employees in the upper range extension under
circumstances described in the plan).
Chapter 53, section 5305(a)(1): Special pay authority (only to the
extent necessary to (1) provide a special rate may not exceed the rate
for EX-IV, plus 5 percent for employees in the upper range extension;
(2) to interpret the references to the minimum and maximum rates of a
grade as references to the normal minimum and maximum rates of a grade
under this plan; and (3) apply an ``effective'' special rate supplement
percentage for employees in the upper range extension under
circumstances described in this plan).
Chapter 53, subchapter III: General Schedule pay rates (except
that, for purposes of applying any other laws, regulations, or policies
that refer to GS employees or to subchapter III of chapter 53 of title
5, United States Code, the modified pay system established under this
plan must be considered to be a GS pay system established under such
subchapter III, except as otherwise provided in this plan; these
purposes include, but are not limited to, references to the General
Schedule in section 5304 (relating to locality pay, except as provided
in the waiver above), section 5545(d) (relating to hazard pay), and
sections 5753-5754 (dealing with recruitment, relocation, and retention
incentives)).
Chapter 53, section 5363: Pay retention (only to the extent
necessary to (1) bar employees with a less than Fully Successful rating
of record from receiving retained rate increases under 5 U.S.C.
5363(b)(2)(B); (2) provide that pay (including any locality adjustment
or special rate supplement) of an employee in the upper range extension
who is rated below Outstanding will be converted to a retained rate
before processing any other actions; (3) provide a retained rate that
is less than the maximum rate (including any locality adjustment or
special rate supplement) of the upper range extension for an employee
who receives a rating of record of Outstanding will be terminated and
converted to an equal adjusted rate; (4) provide the range maximum rate
used to compute retained rate adjustments is the normal range maximum
rate (including any locality adjustment or special rate supplement) for
employees with a rating of record below Outstanding and the upper range
maximum rate (including any locality adjustment or special rate
supplement) for an employee with an Outstanding rating of record; and
(5) provide when a retained rate for an employee with a rating of
record below Fully Successful falls below the applicable adjusted rate
for the normal band maximum, the retained rate will be terminated and
the employee's pay will be set at an adjusted rate equal to the
retained rate).
Chapter 75, section 7512(4): Adverse actions (only to the extent
necessary to provide that adverse actions do not apply to reductions in
rates of basic pay to offset a locality pay or special rate supplement
increase as a result of receiving a rating of record below Fully
Successful).
Note: If any of the provisions of title 5, United States Code,
listed above are amended during the period this demonstration
project is in effect, DVA may choose to terminate the waiver of one
or more such provisions with respect to employees participating in
the project, without formally modifying the project itself. DVA must
notify OPM when any such waiver is terminated.
B. Waivers to Title 5, Code of Federal Regulations
Part 359, subpart G, section 359.705: Pay (only to the extent
necessary to (1) bar employees with a rating of record below Fully
Successful from receiving a saved rate increase under 5 CFR
350.705(d)(1); and (2) apply rules parallel to those governing
adjustment and termination of retained rates under 5 CFR part 536, as
modified under this plan).
Part 430, subpart B, section 430.203: Definitions (only to the
extent necessary to allow an additional rating of record to support a
pay decision under C.3 or 4 of this project plan).
Part 530, section 530.304(a): Establishing or increasing special
rates (only to the extent necessary to (1) provide a special rate may
not exceed the rate for EX-IV, plus 5 percent for employees in the
upper range extension; (2) interpret references to the minimum and
maximum rates of a grade as references to the normal minimum and
maximum rates of a grade under this plan; and (3) apply an
``effective'' special rate supplement percentage for employees in the
upper range extension under circumstances described in this plan).
Part 531, subpart B: Determining Rate of Basic Pay.
Part 531, subpart D: Within-Grade Increases.
Part 531, subpart E: Quality Step Increases.
Part 531, section 531.604: Determining an employee's locality rate
(only to the extent necessary to apply an ``effective'' locality pay
percentage for employees in the upper range extension under
circumstances described in this plan).
Part 531, section 531.606: Maximum limits on locality rates (only
to the extent necessary to provide a locality rate may not exceed the
rate for EX-IV, plus 5 percent for employees in the upper range
extension).
Part 536, subpart C: Pay Retention (only to the extent necessary to
(1) bar employees with a less than Fully Successful rating of record
from receiving retained rate increases under 5 CFR 536.305; (2) provide
that a retained rate may not exceed the rate for EX-IV, plus 5 percent;
(3) provide the pay (including any locality adjustment or special rate
supplement) of an employee in the upper range extension who is rated
below Outstanding will be converted to a retained rate before
processing any other actions; (4) provide a retained rate that is less
than the maximum rate (including any locality adjustment or special
rate supplement)
[[Page 34808]]
of the upper range extension for an employee who receives a rating of
record of Outstanding will be terminated and converted to an equal
adjusted rate; (5) provide the range maximum rate used to compute
retained rate adjustments is the normal range maximum rate (including
any locality adjustment or staffing supplement) for employees with a
rating of record below Outstanding and the upper range maximum rate
(including any locality adjustment or staffing supplement) for an
employee with an Outstanding rating of record; and (6) provide when a
retained rate for an employee with a rating of record below Fully
Successful falls below the applicable adjusted rate for the normal
grade maximum, the retained rate will be terminated and the employee's
pay will be set at an adjusted rate equal to the retained rate).
Part 752, section 752.401(a)(4): Adverse actions (only to the
extent necessary to provide that adverse action provisions do not apply
to reductions in rates of basic pay to offset a locality pay or special
rate supplement increase as a result of receiving a rating of record
below Fully Successful).
Note: If any of the provisions of title 5, Code of Federal
Regulations, listed above are revised during the period this
demonstration project is in effect, DVA may choose to terminate the
waiver of one or more such provisions with respect to employees
participating in the project, without formally modifying the project
itself. DVA must notify OPM when any such waiver is terminated.
[FR Doc. E8-13733 Filed 6-17-08; 8:45 am]
BILLING CODE 6325-43-P