Employee incentive payments increase in 2009

The federal government paid out more than $349 million in recruitment, relocation and retention incentives in 2009, a 22 percent increase over the previous year, according to new data from the Office of Personnel Management.

In a report detailing so-called 3Rs incentives spending, OPM found that 45 federal agencies increased the number and dollar amount of incentive payments used to recruit, relocate and retain talented employees in 2009. Awards jumped 9 percent from the previous year to 43,250 payments. The average incentive totaled $8,079. The majority of agencies surveyed reported that they did not use incentives in 2009, however.

The Defense and Veterans Affairs departments were the largest users of incentive payments, doling out 21,910 and 8,885 awards in 2009, respectively. These agencies had a relatively low average cost per incentive, however. The State Department reported the highest average incentive payment, totaling $12,586 per award.

Several agencies reported a decline in incentive payments due to budget constraints and a changing labor market. The Commerce Department saw a 52 percent drop in the number of awards due to a drop in hiring, particularly for patent examiner positions.

According to the report, agencies used incentives strategically to meet mission-critical needs in health care, engineering, security and information technology, as well as contracting and criminal investigation. OPM found that half of recruitment awards were used to fill entry-level positions, while 77 percent of relocation incentives were paid to employees at the GS-11 level and above. Retention payments were awarded across grades, indicative of a focus on retaining quality employees at all levels, the report said.

While the two-year federal pay freeze does not apply directly to these incentives, Office of Personnel Management Director John Berry in June issued a memo to agency heads asking them to hold total spending on 3Rs payments to 2010 levels through 2012.

Tim McManus, vice president for outreach at the nonprofit Partnership for Public Service, said that as private sector hiring begins to pick up, government could struggle to attract and retain talent while capping the dollars available for incentives.

"In 2010, the federal government still was in a position of hiring whereas other sectors were not as much, so the competitive advantage was in their favor," said McManus. "As the economy rebounds, will [agencies] be able to compete with private and nonprofit if they have to maintain the same level of spending they had in 2010 in a time where because of the economy as a whole they didn't have to spend as much?"

OPM also has called for a review of the 3Rs program. The agency in January issued draft regulations aimed at controlling costs. The proposal would require agencies to annually review recruitment bonuses for hard-to-fill categories of jobs to ensure the payments were still warranted and it would change the residence requirements for relocation incentives.

"Government has to stay competitive," said McManus. "The 3R incentives they have had clearly have helped them to stay competitive or at least be in same ballpark. Government really is going to have to take a look at how they use each one of these to ensure they stay ahead and don't fall behind."