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Pay and Benefits Watch

Bonus Belt-Tightening

By Alex M. Parker aparker@govexec.com February 18, 2010

Agencies have been more generous handing out bonuses to attract and keep exceptional federal employees during the past few years. But don't count on this largess to continue. Recruitment, relocation and retention bonuses are coming under the magnifying glass as Uncle Sam searches for ways to cut spending and rein in the deficit.

In a Feb. 3 memorandum, Office of Personnel Management Director John Berry said regulations that require stronger reviews of such bonuses and guidance to help agencies become more discerning in their use are on the way.

"Even with [an interagency working group's] recommendations for improvement [in administration and oversight], I remain concerned about the continued growth in 3Rs payments, given recent labor market conditions," Berry wrote in the memo. "It appears the problem for many agencies is that there is neither detailed knowledge nor adequate overview at the headquarters level of 3Rs use in the subordinate organizations and field."

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Growth of 3Rs payments began in 2005, when the 2004 Federal Workforce Flexibility Act took effect, broadening the ways agencies could use the incentives. Since then, use of the bonuses has increased steadily. The sum paid governmentwide more than doubled in two years, increasing from $140 million in 2006 to $284 million in 2008, according to OPM. The number of employees receiving bonuses also rose. In 2006, government agencies handed out 22,764 3Rs incentives; in 2008, that number climbed to 39,512.

Employee representatives said they were not opposed to giving the bonus system a harder look. But they added that during the review, OPM and policymakers should remember the critical role incentive payments play in making the government a destination for top talent.

Bonuses are "always prone to be targets when it comes to budget-cutting," said Carol A. Bonosaro, president of the Senior Executives Association.

Retention bonuses also can be crucial in ensuring agencies remain adequately staffed as more civil servants retire, Bonosaro noted. Agencies can use the incentives if they fear an employee will leave, either for another company or for retirement.

Bill Bransford, general counsel for SEA, said agencies rely on 3Rs payments to supplement salaries partly because many government employees find themselves hitting salary ceilings in the General Schedule and Senior Executive Service pay scale.

"They've probably been used more because of the low pay caps, which suppress federal pay," Bransford said. "It's a way to be able to pay people a lot more, particularly people who deserve it."

Recruitment, relocation and retention bonuses normally cannot equal more than 25 percent of an employee's annual salary. For more information about how they work and who qualifies, visit OPM's question-and-answer page.

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  • Someone ought to be worrying about these bonuses! Fraud, corruption, and gross abuse of taxpayer dollars! $20.3 billion dollars! Wall Street bonuses up 17% in 2009 By Ben Rooney, staff reporterFebruary 23, 2010: 12:00 PM ET NEW YORK (CNNMoney.com) -- New York State Comptroller Thomas DiNapoli said Tuesday that Wall Street bonuses jumped 17% last year, to an estimated $20.3 billion, as profits in the financial services sector rebounded. The average taxable bonus for securities industry employees in New York rose to $123,850 in 2009 from $112,000 the year before, according to estimates from the comptroller. Facebook Digg Twitter Buzz Up! Email Print Comment on this story At Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), and JPMorgan Chase (JPM, Fortune 500) overall compensation increased by 31% in 2009. Average compensation rose by 27% to more than $340,000. The rebound in bonus payments comes amid a sharp increase in Wall Street profits, which could reach an "unprecedented" $55 billion for 2009, DiNapoli said. That would be nearly three times greater than the previous all-time record annual profit, but follows a $42.6 billion loss in 2008. The bulk of the increase in profits came from broker-dealer operations, which brought in a record $49.9 billion through the first three quarters of 2009. Despite the increase in compensation and profits, bonus payments remain below record levels of just a few years ago. In 2007, for example, bonuses totaled nearly $33 billion. "It's still not back to historic levels," DiNapoli told reporters at a press conference in New York. "It's down by about 30% compared to the numbers in the bonus pool prior to the downturn and the great recession." DiNapoli said the financial services industry is "vital" to New York's economy, but he acknowledged the massive bonuses are a "bitter pill" for most Americans. "There's a lot of resentment against the industry over its role in the global economic meltdown," DiNapoli said in a statement. "Taxpayers bailed them out, and now they're back making money while many New York families are still struggling to make ends meet." Wall Street firms received billions in government bailout funds in 2009 as the financial crisis crippled the industry and the economy sank into one of the worst recessions on record.
    SnoopDoggy Posted February 24, 2010 9:43 AM
  • "Do you really think the majority of your readers would know what "largess" means?" Ah, yes, I do believe the majority of our readers know that term; well, at least the government employee readers with their commensurately higher education than the population. As a matter of fact, they probably know a number of terms the public isn’t all that familiar with. I know a couple of them have educated me once or twice. That really wasn't that big of a word. I think “Rob Hood”, you need to reexamine this target population. This is SUPPOSED to be Government Executives; although we have MANY of the proletariat out here who just have to deal with those self-same executives.
    Tip off Posted February 23, 2010 11:09 AM
  • Do you really think the majority of your readers would know what "largess" means? Yes, they can look it up. But if your intent is to communicate, rather than just show off your vocabulary, you ought to use simpler terms like "generosity". Just a thought...
    Rob Hood Posted February 22, 2010 8:29 AM
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