[Material Transmitted:]{.underline}

HHS Instruction 531-2, Setting Salary

[Material Superseded:]{.underline}

HHS Instruction 531-2 (all)

HHS Instruction 532-5 (all)

HHS Instruction 536-1 (all)

[Background:]{.underline}

This Instruction has been revised consistent with recent changes in the
organization of HHS, and in support of HHS administrative initiatives
calling for more streamlined rules and greater delegations of authority.

Under this issuance, three Instructions have been consolidated because
of similar subject matter and the need for greater streamlining of the
rules.

Any reference to \"OPDIV\" in this Instruction now includes the PHS
agencies, the Office of the Secretary, the Program Support Center, HCFA,
ACF, and AOA.

This issuance is effective immediately. Implementation of this issuance
must be carried out in accordance with applicable laws, regulations,
bargaining agreements, and Departmental policy.

[Filing Instructions:]{.underline}

Remove superseded material and file new material. Post receipt of this
transmittal to the HHS Check List of Transmittals and file this
transmittal in sequential order after the check list.

Eugene Kinlow

> Deputy Assistant Secretary for Human Resources, OASMB

INSTRUCTION 531-2

Distribution: MS (PERS): HRFC-001

[HHS PERSONNEL INSTRUCTION 531-2]{.underline}

[POSITION CLASSIFICATION PROGRAM]{.underline}

531-2-00 Purpose and Authority

10 References

20 Pay Setting

30 Grade and Pay Retention

531-2-00 PURPOSE AND AUTHORITY

This Instruction states the Department\'s policy and provides guidance
concerning the determination of basic pay of General Schedule (GS)
employees and the entitlement of GS and Federal Wage System (FWS)
employees to grade and pay retention.

531-2-10 REFERENCES

A.  U.S. Code, Chapter 53 (law - pay rates and systems)

B.  CFR, Part 531 (regulations - pay under the General Schedule)

C.  CFR, Part 536 (regulations - grade and pay retention)

D.  HHS Instruction 338-2 (appointments above the minimum because of
    superior qualifications)

E.  HHS Instruction 351-1 (reduction in force (RIF))

531-2-20 PAY SETTING

A.  [Highest Previous Rate]{.underline}

    1.  When the use of the highest previous rate (HPR) is optional
        under Government-wide regulations, the Department\'s policy is
        that the manager who approves a Request for Personnel Action is
        authorized (unless otherwise provided) to approve the
        employee\'s rate of pay after consultation with the personnel
        officer or his/her designee. That rate of pay may be any rate
        between the basic rate for the position and the HPR, subject to
        the restriction in 531-2-20B below. In this situation, the
        employee has no entitlement to a particular rate of pay.

    2.  When applying the HPR, care must be taken to avoid windfalls in
        pay for employees being reinstated or transferring from other
        Federal entities which have pay schedules that are substantially
        higher than GS pay rates.

    3.  The HPR remains available for use in subsequent promotions or
        movement of the employee to another position, unless the
        restriction in 531-2-20B is applicable.

B.  

C.  [Restriction]{.underline}\
    The HPR cannot be used unless an employee\'s most recent annual
    performance rating is fully successful or better. If a performance
    rating is not available, because the individual involved is being
    reinstated or transferred from another agency from which the rating
    is unavailable, a presumed fully successful rating shall be
    applicable.

D.  [Effect of Temporary Promotion]{.underline}\
    \
    The HPR may be used when setting salaries after temporary promotions
    of one year or more. If the HPR is not used, the employee is placed
    at the step he/she would have attained had there been no temporary
    promotion.

E.  [Change to Lower Grade for Cause]{.underline}\
    \
    Employees who are changed to lower grades for personal cause cannot
    have their pay set pursuant to the HPR. When employees are changed
    to lower grades for cause (e.g., inefficiency, less than fully
    successful performance, misconduct, etc.), their pay will be set in
    the lower grades so that there is a reduction in pay equivalent to
    at least two within-grade increases in the higher grade from which
    being reduced. If a two-step equivalent computation falls between
    two steps of the lower grade, the lower step rate must be used.
    Management may set the employee\'s pay as low as the first step of
    the grade to which the employee is demoted.\
    \
    [NOTE :]{.underline} In accordance with OPM Regulation 536.105, an
    employee who is downgraded for cause is not eligible for retained
    pay. Therefore, if the employee\'s pay falls above Step 10 of the
    lower grade, his/her pay will be set at Step 10.

F.  [Change to Lower Grade at Own Request (Including those involving
    transfers)]{.underline}

    1.  The HPR cannot be used when an employee is changed to a lower
        grade at his/her own request, except as indicated in 2 below.
        (If an employee is eligible for grade and pay retention, his/her
        salary should be set in accordance with 5 CFR 536.)

    2.  When the employee-requested action also serves the convenience
        of the Government, the employees pay may be set at the step
        represented by the

G.  HPR, or a lower step. The fact that an action series the convenience
    of the Government must be supported by documentation that reflects
    management\'s need for the employee\'s skills and knowledge in the
    specific situation and that filling the position with the employee
    avoids costs that would otherwise accrue through recruitment,
    reduction-in-force, etc.

    1.  When an employee requests a change to a lower grade, to a
        position which is less than the top of a career ladder, the
        highest previous rate that may be used in setting the
        employee\'s salary is the rate in the lower grade which, upon
        repromotion, will place the employee at the rate of pay he/she
        would have attained if the employee had remained in the former
        grade (unless the exception in 2 above applies). This includes
        any step increases the employee would have received if he/she
        had remained at the higher grade during the period of qualifying
        for repromotion. For example, if an employee would have received
        Step 3 of the former grade during that period, the rate of pay
        at Step 3 is used in determining the employees pay at the lower
        grade.\
        \
        If the employee would not have been eligible for a step increase
        at the former grade between the time of the change to lower
        grade and the time the employee will qualify for repromotion,
        the step increase cannot be credited in setting the employee\'s
        pay at the lower grade. For example, if the employee qualifies
        for promotion within 4 months after a change to a lower grade
        and the step increase at the higher grade is due in 9 months,
        that step increase cannot be credited.

H.  [Special Pay Rates]{.underline}\
    \
    Special pay rates for recruitment and retention as provided in 5
    U.S. Code 5305 can be used as the HPR under the conditions outlined
    below:

    1.  Reassignment must be from and to positions within the
        Department.

    2.  The special rate must be the employee's current rate of pay.

    3.  The servicing personnel officer/designee with appointing
        authority for the position being filled (based on
        recommendations from both gaining and

I.  losing management officials) must determine that the need for
    servicees of the employee will be greater in the new position.

J.  [Promotion from Federal Wage System]{.underline}\
    \
    When a FWS employee is promoted to the GS, pay will be set in
    accordance with the HPR. This is because FWS employees promoted to
    GS positions are not entitled to a two-step increase. (See U.S. v.
    Clark - Supreme Court, 80-1121.)

K.  [Documentation of Intended Use of the HPR]{.underline}\
    \
    When a personnel office intends to use the HPR but does not have
    sufficient proof of an applicants or employees previous rate of pay,
    it cannot grant the HPR until it receives the necessary
    documentation. Pending receipt of the documentation, the servicing
    personnel office must annotate the employees Notification of
    Personnel Action (SF 50) with regard to its intent to use the HPR.
    The employees pay will be set at the lowest step or other
    appropriate step of the grade until documentation is, received. Upon
    receipt of confirmation of the HPR, the employee\'s salary will be
    adjusted retroactively to the date of appointment. Acceptable
    documentation is an SF 50 or like document, or the employee\'s
    official earnings and leave statement.

531-2-30 GRADE AND PAY RETENTION

A.  [Transfer and Reassignment of Employees]{.underline}

    1.  Employees who are on grade retention are entitled to their
        retained grade in any position they hold. However, the
        appointing authority, at the request of the selecting official,
        may ask an employee to waive his/her retained grade at the time
        he/she is offered a transfer into the Department or a
        reassignment within the Department to a position at a lower
        grade than his/her retained grade. An employee who waives grade
        retention is not entitled to pay retention.

    2.  An employee cannot waive entitlement to pay retention. Pay
        retention entitlement ceases only when one of the conditions
        stated in the Office of Personnel Management (OPM) regulations
        occurs.

B.  Disability\
    \
    The appointing authority is authorized to grant pay retention to
    employees who are

C.  found to be disabled for their current position yet are willing to
    accept assignment to a lower graded position, the duties of which
    they are capable of performing. The finding of disability must be
    supported by acceptable medical evidence. This policy is applicable
    regardless of whether an application for disability retirement has
    been filed or the disability retirement application has been denied.
    Such employees are not entitled to grade retention.

D.  [Optional Use of Grade and Pay Retention]{.underline}\
    \
    Personnel officers or their designees may approve the use of grade
    or pay retention where such use is optional.