U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

What is a performance-based cash award?

A performance-based cash award, also commonly known as a rating-based award, is a lump-sum cash payment authorized by 5 U.S.C. 4505a and 5 CFR 451.104 and requires only the most recent rating of record as the sole justification for the award.

Can non-General Schedule employees receive rating-based awards?

Yes, regulations allow agencies to grant non-GS employees (except for members of the Senior Executive Service) rating-based awards if the employees -

• are covered by 5 U.S.C. chapter 45, and
• are not otherwise covered by a separate statute that authorizes rating-based awards

Career members of the Senior Executive Service are eligible for performance bonuses under the authority of 5 U.S.C. 5384 and 5 CFR 534.405.

Why did OPM issue these regulations?

OPM issued these regulations to make clear the following:

• rating-based cash awards must be based on a rating of record at the "fully successful" level (or equivalent) or higher, and
• rating-based awards programs, as designed and applied, must make meaningful distinctions based on levels of performance.

Do these regulations support merit system principles?

Yes. Paying higher performers higher awards supports the merit system principle, "appropriate incentives and recognition should be provided for excellence in performance." (5 U.S.C. 2301(b)(3))

What does "meaningful distinctions based on levels of performance" mean?

When employees with higher ratings of record receive larger rating-based cash awards than those with lower ratings of records, agencies are making meaningful distinctions based on levels of performance.

At what organizational level within an agency should "meaningful distinctions" be made?

Agencies must design the provisions of their programs for rating-based awards to require meaningful distinctions based on levels of performance. All agency representatives who have a role in recommending or approving rating-based awards must adhere to these program requirements when exercising their authorities.

Do the regulations affect all cash awards?

The regulations only affect rating-based cash awards granted by agencies using the authorities in 5 U.S.C. 4505a and 5 CFR 451.104(a)(3).

Do agencies still have flexibility when establishing rating-based award programs?

Yes. This policy does not limit agencies' ability to establish award programs to support their performance culture. However, for rating-based awards, agencies must ensure that employees with higher ratings of record receive larger awards than those with lower ratings of record.

Can agencies still pay rating-based awards as dollar amounts?

Yes, as long as employees with higher ratings of record receive higher dollar amounts than those with lower ratings of record. (e.g., An award program must grant GS-9's who receive an outstanding rating a higher dollar amount than GS-9's who receive a fully successful rating.) Agencies may use their discretion whether to pay rating-based awards as a lump-sum dollar amount or a percentage of base pay.

Are agencies required to have review boards or awards committees to oversee the awards process?

Not necessarily since agencies have the flexibility to design how their awards programs will operate. However, agencies may find such review boards or awards committees add a dimension of impartiality to the awards process and can help prevent perceptions of favoritism.

Are agencies required to keep award recipient information private?

For the most part, compensation-related information in the Federal Government is a matter of public record or obtainable under the Freedom of Information Act. Generally, this includes award payments except for rating-based awards. Agencies may not disclose award amounts if doing so would reveal the recipient's rating of record, which is protected information under the Privacy Act.

Can an employee receive a rating-based cash award if he/she does not have a rating of record?

No. Rating-based cash awards are based on the rating of record, which is the written justification for the award.

Can an employee receiving a "minimally satisfactory" or "unacceptable" rating of record receive a rating-based cash award?

No. An employee must have a "fully successful" or equivalent rating of record or higher to be eligible to receive a rating-based cash award.

How can an agency reward an employee with a "minimally satisfactory" or "unacceptable" rating of record, but who performs at the "outstanding" level in some part or function of his/her job?

While such a situation would be very rare, if an employee receives a rating of record of unacceptable or minimally satisfactory but performs at the outstanding level on a special project or in a single aspect of his/her job, regulations allow the agency to recognize the single, significant, outstanding performance with a contribution-based award. However, since the rating of record reflects overall performance during the appraisal period (generally one year), an employee who receives such a low rating generally has not contributed to the agency's goals and objectives in a way warranting recognition, particularly a cash award.

How do the regulations affect agencies using a two-level (Pass/Fail) appraisal program?

Rating-based awards require a rating of record of Fully Successful or higher. Pass/Fail appraisal programs do not provide a basis for making further distinctions among the employees rated "Pass" solely on the basis of their ratings. There is no prohibition against granting rating-based awards to employees rated "Pass"; however, agencies using Pass/Fail programs must ensure that employees who receive a rating-based award for a "Pass" rating truly performed at the equivalent of Fully Successful performance or better. Agencies also have the option to grant special act awards to employees who merit them rather than using rating-based awards. Therefore, these regulations should have no impact on such programs.

Should agencies consider other factors when determining rating-based cash award amounts? (e.g., other cash or time-off awards, QSIs and promotions)

Yes. Agencies should consider other types of awards or personnel decisions to ensure employees are recognized appropriately commensurate with their achievements.

Must all employees rated outstanding receive an award before those rated at lower levels?

Within an organization with authority to grant awards, this is what you expect to find (i.e., all employees rated Outstanding receive awards before other employees with lower ratings). However, an agency's policy should include any other criteria to be considered when making award recommendations and decisions, including any other awards or personnel actions that should be taken into consideration such as time off, a QSI, or a recent promotion.

Can agencies require employees to have a rating of record above "fully successful" to receive a rating-based cash award?

Yes, agencies have the flexibility to establish their own policies, which may include specifying the rating level(s) needed to receive a rating-based award.

Is an employee entitled to a rating-based award if he/she receives a "fully successful" or "outstanding" rating of record?

No, there is no entitlement to any award. However, agencies may have policies in place giving the appearance of an entitlement or fostering an entitlement mentality among their employees. Such policies must be reviewed to ensure they comply with all other laws that might impact the payment of awards such as the Fair Labor Standards Act (FLSA).

Can an employee rated "Outstanding" receive a smaller award than one who is rated at a lower level within the agency?

Comparisons between organizations with the authority to make awards decisions may produce different results than those found when analyzing within a single organization. Meaningful distinctions must be made at the level award decisions are made, which could be at a group, center, component, or agency level. Agencies have the discretion to decide at which level within the agency awards decisions will be made.

How can agencies ensure these regulations will not lead to favoritism?

Agencies should establish and maintain fair and transparent performance appraisal and awards programs. In addition, agencies are encouraged to provide training and retraining to supervisors and managers to ensure these programs are administered fairly. In some cases the use of awards committees helps allay employee suspicions of favoritism.

How will these regulations affect other personnel decisions, within-grade increases, raises, gainsharing and other types of awards?

These regulations affect only rating-based awards, so they have no impact on rules governing other types of awards or personnel actions.

Are agencies required to update their award policies based on these regulations?

Not if the agency award program already complies with these regulations. However, agencies should review their awards policies periodically to ensure they are still effective and function as intended. Whenever reviewing or designing their award programs, agencies must make sure their rating-based awards policies require meaningful distinctions based on levels of performance.

Can agencies establish award programs linking award amounts to specific ratings?

They can, but they must be aware there will be FLSA implications when an agency hard links award amounts to specific ratings. When an agency predetermines an award amount or guarantees an award payment for a specific rating, the award is considered nondiscretionary. Nondiscretionary awards must be included in total remuneration and impact the calculation of overtime payments.

Will there be training available for any changes to the awards program?

If an agency changes its awards program, it should provide appropriate training so employees and managers are aware of how the program is intended to operate. In addition, performance management training, which includes rewarding employees, should be conducted on a regular basis. OPM recommends that agencies train or retrain employees and supervisors on awards and performance appraisal programs regularly, particularly when the agencies' programs change or they have new employees or managers.

Will there be performance management training for rating officials and will they be held accountable for making meaningful distinctions in performance?

OPM encourages agencies to train rating officials on performance management topics (including developing performance plans, providing feedback, appraising and rewarding performance). In addition, OPM encourages agencies to hold supervisors accountable for fulfilling their performance management responsibilities. Agencies often establish elements and standards in the raters' performance plans to hold them accountable for the performance management of their subordinates.