Pentagon Cracks Down on Performance Awards

New guidance restricts incentive pay for civilians during sequestration.

With few exceptions, the Pentagon will not award incentive pay to civilian employees during sequestration unless legally required to do so, according to new guidance from the Defense Department.

“For purposes of equity and fairness in their application, restrictions on discretionary monetary awards prescribed by [Office of Management and Budget] will apply to all performance awards programs in the Department of Defense with limited exceptions,” stated the Aug. 1 memorandum from Assistant Defense Secretary for Readiness and Force Management F.E. Vollrath to top department officials. OMB in February issued guidance directing agencies to restrict pay awards to employees during sequestration.

The Defense guidance said some incentive pay still is permitted: quality step increases, travel savings incentives, foreign language awards, recruitment, relocation and retention incentives, student loan repayments, suggestion and invention incentives and time-off awards. “However, spending for these types of awards should occur only on a highly limited basis and in circumstances where necessary and critical to maintaining the mission,” the memo said. Spending on quality step increases and recruitment, relocation and retention incentives cannot exceed fiscal 2010 levels, Vollrath said.

Legally required awards include those resulting from third-party decisions, like an employee appeal, or pay awards mandated as part of a collective bargaining agreement.

The Defense guidance also provides information on performance awards for employees in “nonappropriated fund” -- or NAF -- positions and those covered under alternative pay systems, which are funded differently than the General Schedule and Federal Wage System. For instance, NAF employees, if they are funded in whole or part with congressional funds, cannot receive pay awards unless it’s legally required; however NAF performance awards entirely funded through nonappropriated money are not covered by the OMB restrictions.

Pay awards approved before OMB’s Feb. 27 guidance are exempt from the restrictions.

The Pentagon also encourages managers to make use of “nonmonetary” recognition programs to reward deserving employees. “Recognition in any form should be done publicly to maximize awareness that good performance and solid contributions will be recognized,” the memo stated.

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