**Department of Veterans Affairs VA HANDBOOK 5007/5**

**Washington, DC 20420 Transmittal Sheet**

**January 12, 2003**

# PAY ADMINISTRATION

**1. REASON FOR ISSUE:** To establish Department of Veterans Affairs
(VA) procedures on pay retention for employees appointed under title 38
who are reduced in grade or rate of basic pay as a result of a
management action.

**2. SUMMARY OF CONTENTS/MAJOR CHANGES:** This handbook contains
mandatory VA procedures on pay administration. A paragraph has been
added to Part III, Chapter 6, "Grade and Pay Retention," to provide for
pay retention for title 38 employees who are reduced in grade or basic
pay as a result of a management action not initiated for cause. This
change will be incorporated into the electronic version of VA Handbook
5007 that is maintained on the [Office of Human Resources Management
website.](http://vaww.va.gov/ohrm/HRLibrary/HRLibrary.htm)

**3. RESPONSIBLE OFFICE:** The Human Resources Management Programs and
Policies Service (051), Office of the Deputy Assistant Secretary for
Human Resources Management.

**4. RELATED DIRECTIVES:** VA Directive 5007, "Pay Administration."

**5. RESCISSIONS:** None.

**CERTIFIED BY: BY DIRECTION OF THE SECRETARY**

**OF VETERANS AFFAIRS**

/s/John A. Gauss /s/Jacob Lozada, Ph.D.

Assistant Secretary for Assistant Secretary for Human

Information and Technology Resources and Administration

DISTRIBUTION: ELECTRONIC ONLY

# 

# 

**PAY ADMINISTRATION**

# PART III. PAY SETTING COINCIDENT WITH

# PERSONNEL ACTIONS/MOVEMENTS DURING EMPLOYMENT

**CONTENTS**

**PARAGRAPH PAGE**

**[CHAPTER 1](#partIIIch1). GENERAL**

1\. [PURPOSE](#partIIIch1para1) III-1

2\. [RESPONSIBILITIES](#partIIIch1para2) III-1

**[CHAPTER 2](#partIIIch2). PROMOTIONS/ADVANCEMENTS**

1\. [ADVANCEMENTS FOR PERSONNEL APPOINTED UNDER 38 U.S.C.
7401](#partIIIch2para1) III-3

2\. [PROMOTIONS FOR PERSONNEL APPOINTED UNDER 38 U.S.C.
7405](#partIIIch2para2) III-5

3\. [PROMOTIONS FOR POSITIONS SUBJECT TO 5 U.S.C., CHAPTER
51](#partIIIch2para3) III-5

4\. [PROMOTIONS FOR EMPLOYEES IN POSITIONS UNDER THE
FWS](#partIIIch2para4) III-6

[**CHAPTER 3.**](#partIIIch3) **CHANGE TO LOWER GRADE**

1\. [CHANGE TO LOWER GRADE FOR PERSONNEL APPOINTED](#partIIIch3para1)

[UNDER 38 U.S.C. 7401](#partIIIch3para1) III-7

2\. [CHANGE TO LOWER GRADE FOR POSITIONS PAID FROM THE
GENERAL](#partIIIch3para2)

[SCHEDULE](#partIIIch3para2) III-7

3\. [CHANGES TO LOWER GRADE FOR EMPLOYEES IN POSITIONS UNDER THE
FWS](#partIIIch3para3) III-7

**[CHAPTER 4](#partIIIch4). OTHER ASSIGNMENT CHANGES AND MOVEMENTS**

1\. [PERSONNEL APPOINTED UNDER 38 U.S.C. 7306 AND
7401](#partIIIch4para1) III-9

2\. [PERSONNEL IN POSITIONS SUBJECT TO 5 U.S.C., CHAPTER
51](#partIIIch4para2) III-12

3\. [PERSONNEL IN POSITIONS UNDER THE FWS](#partIIIch4para3) III-13

4\. [SETTING RATES OF PAY FOR MOVEMENTS FROM
NON-GENERAL](#partIIIch4para4)

[SCHEDULE POSITIONS TO GENERAL SCHEDULE POSITIONS](#partIIIch4para4)
III-13

5\. [SETTING RATES OF PAY FOR MOVEMENTS BETWEEN PAY
SYSTEMS,](#partIIIch4para5)

[WAGE SCHEDULES AND WAGE AREAS](#partIIIch4para5) III-14

6\. [MANDATORY RESTORATION AFTER MILITARY SERVICE OR
COMPENSABLE](#partIIIch4para6)

[WORK INJURY (5 CFR 353)](#partIIIch4para6) III-14

7\. [SIMULTANEOUS PAY CHANGES](#partIIIch4para7) III-14

# 

# CONTENTS - CONTINUED

**PARAGRAPH PAGE**

[**CHAPTER 5.**](#partIIIch5) **WITHIN GRADE INCREASES AND PERIODIC STEP
INCREASES**

1\. [PERIODIC STEP INCREASES FOR PERSONNEL APPOINTED UNDER 38 U.S.C.
7401](#partIIIch5para1) III-15

2\. [PERIODIC STEP INCREASES FOR PERSONNEL APPOINTED UNDER 38 U.S.C.
7405](#partIIIch5para2) III-18

3\. [ANNUAL STEP RATE REVIEWS](#partIIIch5para3) III-18

4\. [ADMINISTRATIVE STEP INCREASES FOR PERSONNEL APPOINTED
UNDER](#partIIIch5para4)

[38 U.S.C. 7306](#partIIIch5para4) III-24

5\. [WITHIN-GRADE INCREASES FOR GENERAL SCHEDULE EMPLOYEES IN
POSITIONS](#partIIIch5para5)

[SUBJECT TO 5 U.S.C., CHAPTER 51 AND TITLE 38 HYBRID POSITIONS
APPOINTED](#partIIIch5para5)

[UNDER 38 U.S.C.7401(3) AND 7405(a)(1)(B)](#partIIIch5para5) III-25

6\. [WITHIN-GRADE INCREASES FOR FEDERAL WAGE SYSTEM
EMPLOYEES](#partIIIch5para6) III-28

7\. [REFERENCES](#partIIIch5para7) III-31

[**CHAPTER 6.**](#chapter-6.-grade-and-pay-retention) **GRADE AND PAY
RETENTION**

1\. [GENERAL](#partIIIch6para1) III-33

2\. [GRADE RETENTION UNDER TITLE 5](#partIIIch6para2) III-33

3\. [PAY RETENTION UNDER TITLE 5](#partIIIch6para3) III-34

4\. [TERMINATION OF GRADE AND PAY RETENTION BENEFITS (TITLE 5
ONLY)](#partIIIch6para4) III-35

5\. [APPEALS (TITLE 5 ONLY)](#partIIIch6para5) III-35

\[6. [PAY RETENTION UNDER TITLE 38 (OTHER THAN
NURSES)](#partIIIch6para6) III-36

7.\] [PAY RETENTION UNDER TITLE 38 FOR NURSES AND NURSE
ANESTHETISTS](#partIIIch6para7)

[SUBJECT TO THE LOCALITY PAY SYSTEM](#partIIIch6para7) \[III-37\]

\[8.\] [DOCUMENTATION](#partIIIch6para8) III-38

\[9.\] [REFERENCES](#partIIIch6para9) \[III-38

10\. [AUTHORITY](#partIIIch6para10) III-38\]

[**CHAPTER 7.**](#partIIIch7) **PAY ADMINISTRATION FOR SPECIAL SALARY
RATES APPROVED UNDER 38 U.S.C. 7455**

1\. [ABOVE MINIMUM ENTRANCE RATES (INCLUDING
ABOVE-MINIMUM](#partIIIch7para1)

[ENTRANCE RATES ON A SPECIAL SALARY RATE RANGE)](#partIIIch7para1)
III-39

2\. [SPECIAL SALARY RATE RANGES](#partIIIch7para2) III-39

3\. [REDUCED OR DISCONTINUED RATES](#partIIIch7para3) III-40

4\. [MOVEMENTS TO POSITIONS WITH ABOVE-MINIMUM ENTRANCE
RATES](#partIIIch7para4)

[OR SPECIAL SALARY RATE RANGES APPROVED UNDER THIS
CHAPTER](#partIIIch7para4) III-40

5\. [MOVEMENTS FROM POSITIONS WITH ABOVE-MINIMUM ENTRANCE
RATES](#partIIIch7para5)

[OR SPECIAL SALARY RATE RANGES APPROVED UNDER THIS
CHAPTER](#partIIIch7para5) III-41

# CHAPTER 6. GRADE AND PAY RETENTION

**1.** []{#partIIIch6para1 .anchor}**GENERAL.** The grade and pay
retention provisions of this chapter apply to employees under or moving
into positions under the General Schedule and the Federal Wage System,
including Non-appropriated Fund employees in the Veterans Canteen
Service who are subject to the Federal Wage System. \[Employees
appointed under 38 U.S.C. 7306, 7401(1), and 7405 are eligible for pay
retention only to the extent specified in paragraphs 6 and 7 below.\]
This chapter does not cover the following categories of employees:

\[a.\] Employees compensated under the Executive Schedule (5 U.S.C.,
chapter 53).

\[b.\] Non-appropriated Fund Veterans Canteen Service employees
appointed under 38 U.S.C. 7802, except those employed in a recognized
trade or craft, as indicated in above. **NOTE:** *All Non-appropriated
Fund Veterans Canteen Service employees moving into positions subject to
the Federal Wage System are eligible for grade and pay retention
benefits provided they meet the criteria contained in this chapter.*

\[c.\] Purchase and hire employees appointed under Schedule A, section
213.3127(a)(1).

\[d.\] Employees whose appointments have definite time limitations or
are designated as temporary or term.

\[e.\] Senior-level employees, members of the Board of Contract Appeals,
members of the Board of Veterans' Appeals, and fee basis appointees.

[]{#partIIIch6para2 .anchor}**2. GRADE RETENTION UNDER TITLE 5**

a\. Grade retention is required by 5 CFR 536.103(a) if an employee is
changed to a lower grade position in a covered pay schedule as a result
of reclassification or reduction-in-force procedures. Employees must
meet the appropriate eligibility requirements in 5 CFR 536.103(c) (1) or
(2) to be eligible for grade retention under 5 CFR 536.103(a).

b\. Under the provisions of 5 CFR 536.103(b), VA is extending grade
retention to eligible employees who are, or who might be, reduced to a
grade in a covered pay schedule as a result of a reorganization
(including transfer-of-function) or a reclassification decision
announced by management in writing. To be eligible for grade retention
under 5 CFR 536.103(b), the position must be offered by the official
having delegated appointment authority under VA Handbook 5001, General
Introduction and Administration, and the employee must meet the
appropriate eligibility requirements in 5 CFR 536.103(c)(3). The
following documentation is required when applying grade retention under
this chapter:

> \(1\) If the employee accepts an offer under this chapter, the
> following information will be documented in his or her personnel
> folder to record the basis for grade retention: the reason for the
> reorganization or reclassification; the title, grade, and series of
> the position being abolished, downgraded, or transferred;
>
> and a description of how the demotion reduced the adverse impact of
> the reorganization or reclassification. An example of an appropriate
> use of this authority is for transfer-of-function volunteers who allow
> the Department to retain employees who would otherwise be separated.
> (Under 5 CFR 351.303(e), employees may be permitted to volunteer to
> transfer with a function. By offering grade retention to a volunteer
> who is willing to transfer if, and only if, grade retention is
> offered, management may be able to retain the services of both this
> employee and the employee who would otherwise be separated for failing
> to transfer with his/her function.)
>
> \(2\) When an employee is offered a position with grade retention in
> anticipation of his or her current position being abolished or
> downgraded, the employee shall be informed in writing that acceptance
> of the offered position is not required and that the declination of
> the offer has no effect on the employee\'s entitlement to grade
> retention if he or she does not accept the offer and is then actually
> changed to a lower grade position as a result of reduction-in-force
> procedures or a reclassification process.
>
> \(3\) When an employee is offered a position with grade retention in
> lieu of transferring with his or her function, the employee shall be
> informed in writing that acceptance of the position is not required
> and the declination of the offer has no effect on the employee's
> eligibility to transfer with his or her function.
>
> \(4\) When an employee is offered a position with grade retention in
> anticipation of another employee being demoted or separated as a
> result of reduction-in-force procedures, reclassification or
> transfer-of-function, the offer must state that if the employee
> declines, he or she will remain in his or her position unless
> otherwise reduced under one of these procedures.

[]{#partIIIch6para3 .anchor}**3. PAY RETENTION UNDER TITLE 5**

> a\. Pay retention is required for those employees whose pay would
> otherwise be reduced under the circumstances described in 5 CFR
> 536.104(a).
>
> b\. Under the provisions of 5 CFR 536.104(b), VA is extending pay
> retention to employees placed in positions when the employee's pay
> would otherwise be reduced, when the placement is not for cause,
> including performance evaluation, or at the employee's request, and
> when the employee is not otherwise eligible for pay retention under
> paragraph 1 above. For example:

\(1\) Pay retention based on special recruitment needs must be supported
by a memorandum from the selecting official documenting the KSAOs
(knowledges, skills, abilities, and other characteristics) required for
the position; the lack or comparable lack of possession of such KSAOs by
other available candidates; and that the non-selection of the
change-to-lower-grade candidates would adversely impact upon the
efficiency or effectiveness of operations or programs.

\(2\) Pay retention based upon demotion or reassignment as a result of
solicitation of an employee by the Department to fill a position
requiring special KSAOs must be documented by a memorandum

which, in this case, would show the KSAOs required, the candidate's
possession of them, and the unlikelihood of locating other candidates
with equal possession of these KSAOs.

\(3\) Pay retention because of a change to lower grade or a reassignment
in lieu of disability retirement.

\(4\) Pay retention because of a change to a lower grade initiated by
the Department. It is not considered to be taken at the employee's
request even though the employee may have previously asked the
Department to consider his or her personal situation. For example, when
Department officials judge that the employee's skills could be better
utilized in a position for which there are no special recruitment needs.

> c\. If the employee, for his or her personal advantage, initiates the
> change to lower grade and the Department is responsive thereto, pay
> retention benefits do not apply. (For example, the employee
> voluntarily applies for a change to lower grade under competitive
> merit promotion procedures and the change is not to a recognized
> employee development program, to a formal upward mobility program, or
> based on a special recruitment need, or an employee applies for a
> change to a lower grade for health reasons when such a change has not
> been initiated or requested by the Department.) If the placement
> action results in a change to lower grade or reassignment resulting
> from a solicitation by the Department to fill a position requiring
> special skills, it is not taken at the employee's request, even though
> the employee may have previously asked the Department to consider his
> or her personal situation. **NOTE:** *It may not be assumed that
> simply because management initiates recruitment by advertising a
> vacancy and a change to lower grade or rate of pay results, management
> has initiated the action. Pay retention is only appropriate for
> placements meeting the criteria contained in subparagraphs a and b
> above.*

# 

# 4. TERMINATION OF GRADE AND PAY RETENTION BENEFITS (TITLE 5 ONLY)

[]{#partIIIch6para4 .anchor}

a\. Eligibility for grade retention is terminated under the
circumstances described in 5 CFR 536.207 and 5 CFR 536.208.

b\. Eligibility for pay retention is terminated under the conditions
described in 5 CFR 536.209.

## 5. APPEALS (TITLE 5 ONLY)

[]{#partIIIch6para5 .anchor}

a\. **Declination of Reasonable Offer.** Employees who believe their
grade or pay retention benefits have been improperly terminated for
failure to accept a reasonable offer may appeal the termination under 5
CFR 536.302. The criteria for a reasonable offer are contained in
5 CFR 536.206.

b\. **Failure to Comply.** If the employee believes his or her grade
retention benefits have been improperly terminated for failure to enroll
in or comply with the requirements of the Priority Placement Program,
the employee may appeal such termination of benefits through the VA
Grievance Procedure or through an appropriate negotiated grievance
procedure, as applicable.

[]{#partIIIch6para6 .anchor}\[**6. PAY RETENTION UNDER TITLE 38 (OTHER
THAN NURSES)**

a\. **Coverage**

\(1\) Employees appointed under or moving into positions appointed under
the provisions of title 38 U.S.C. 7306, 7401(1) and 7405(a)(1)(A),
except for nurses and nurse anesthetists who are covered by paragraph 7
below, who undergo the following actions are *entitled* to retention of
their basic rate of pay:

\(a\) Employees whose rates of basic pay would otherwise be reduced as a
result of a reduction or termination of a special salary rate schedule;

\(b\) Employees whose rates of basic pay would be reduced because of a
transfer or reassignment initiated by management for reasons other than
cause. This includes employees who choose to accept reassignment to a
lower graded position in lieu of separation as a result of a management
action, such as reorganization or transfer of function.

\(2\) Pay retention *may* also be authorized for employees appointed
under or moving into positions appointed under title 38 U.S.C. 7306,
7401(1) and 7405(a)(1)(A), whose rates of basic pay would otherwise be
reduced, when the placement of the employee is not for cause, including
performance or misconduct, or at the employee's request, and when the
employee is not otherwise eligible for pay retention under subparagraph
a(1) above. Placement of an employee in a position initiated or directed
by management is not considered to be taken at the employee's request
even though the employee may have previously asked the Department to
consider his or her personal situation.

b\. **Pay Administration**

\(1\) On the date the reduction in base pay was to have occurred,
employees are to be placed in the lowest step of the grade that equals
or exceeds their existing rate of basic pay immediately preceding the
action. If no such rate exists, employees are placed in pay retention
and retain the rate of basic pay held immediately before the action, not
to exceed 150 percent of the maximum of the grade for the new position.

\(2\) The rate of basic pay retained by eligible employees is also
limited by the provisions of 38 U.S.C. 7404(d)(1) and (d)(2) to Level IV
or Level V of the Executive Schedule, as applicable.

\(3\) Employees placed in pay retention shall receive 50 percent of any
subsequent general pay increases in the maximum rate of the grade of the
new positions held. Pay retention terminates when the maximum authorized
rates of the new positions equal or exceed the employees\' retained
rates, as adjusted herein.

\(4\) Employees on pay retention who are subsequently promoted will have
their new rates of basic pay determined as if they were being promoted
from the maximum rate of the grade for their positions. If the new rates
upon promotion, as determined in accordance with the provisions of
paragraphs 1 or 2, chapter 2 of this part, are lower than the
employees\' retained rates of basic pay, they will be placed in the
lowest steps that equal or exceed their retained rates. If their
retained rates exceed the maximum rates of the grades to which promoted,
the employees will remain on pay retention.

\(5\) Entitlement to pay retention shall terminate if employees are
reassigned or changed to a lower grade at their request or for cause.

[]{#partIIIch6para7 .anchor}**7.**\] **PAY RETENTION UNDER TITLE 38 FOR
NURSES AND NURSE ANESTHETISTS SUBJECT TO THE LOCALITY PAY SYSTEM**

a\. **Conditions Conferring Eligibility for Pay Retention.** Employees
undergoing the following actions are eligible for pay retention:

\(1\) Employees whose pay would otherwise be reduced as a result of a
reduction or termination of a pay schedule in excess of 133 percent;

\(2\) Employees whose above-minimum entrance rates or special salary
rates have been reduced or terminated;

\(3\) Employees placed at another facility for the good of VA, or by
management-directed actions for reasons other than cause (see par.
1c(2)(b) of chapter 4 this part, and appendix II-B); and

\(4\) Employees reassigned to another facility by management-initiated
action under subparagraph 1c(2)(c)[1]{.underline}.[b]{.underline}. of
chapter 4, this part.

**NOTE:** *Employees transferred or reassigned to another location by
management-initiated action are not automatically entitled to pay
retention. They may be offered the rate of pay for the grade and step at
the gaining facility or an intervening rate that is more than the rate
for the grade and step at the gaining facility but less than pay
retention (see subparagraph 1c(2)(c)[1]{.underline}. of chapter 4 this
part).*

\(5\) Nurse executives whose rate of basic pay would otherwise be
reduced as a result of a change in the facility complexity level (see
par. 2b(2) of appendix II-B);

\(6\) Employees whose pay would otherwise be reduced as a result of a
termination of a specialty pay schedule (see par. 4 of chapter 1, part
X).

b\. **Pay Administration Policies Applicable to Employees Eligible for
Pay Retention**

\(1\) On the date of the action, employees are to be advanced to the
lowest step rate of the grade, which equals or exceeds their existing
rate of basic pay before the action. (If the employee is placed in a
step, pay retention will not apply.) If no such rate exists, the
employee is placed at the top step of the grade and retains the rate of
basic pay held before the action, unless a different rate is authorized
under subparagraph 1c(2)(c) of chapter 4, this part.

\(2\) The employee receives 50 percent of any subsequent increase in the
maximum authorized rate of the grade and pay retention terminates when
the maximum authorized rate of the grade equals or exceeds the
employee\'s retained rate. When pay retention is terminated, the
employee is automatically placed at the top step of the grade,
regardless of the amount of pay increase.

\(3\) Employees on pay retention who are promoted at the same facility
shall have their pay determined as if they were not on pay retention.
**NOTE:** *They are considered to be at the maximum authorized step of
their existing grade.* However, if the maximum authorized rate of the
higher grade is lower than the retained rate, pay retention continues.

\(4\) Pay retention terminates if the employee is reassigned or changed
to a lower grade for cause or at the employee\'s request.

\[**8.**\] []{#partIIIch6para8 .anchor}**DOCUMENTATION.** The
application of the provisions of this \[chapter\] shall be documented in
writing as a permanent part of the employee\'s personnel folder. At a
minimum, this will include the documentation required in paragraphs 2b
and 3b of this chapter and a copy of the letter described in 5 CFR
536.304.

\[**9.**\] []{#partIIIch6para9 .anchor}**REFERENCES**

a\. 5 U.S.C. 5361-5366.

b\. 5 Code of Federal Regulations, part 536.

c\. 38 U.S.C. 512 and 7304.

\[[]{#partIIIch6para10 .anchor}**10. AUTHORITY**. The policies on grade
and pay retention in this chapter pertaining to title 38 employees are
authorizing regulations prescribed pursuant to the Secretary's authority
under 38 U.S.C. 7421(a) and the Under Secretary for Health's authority
under 38 U.S.C. 7304. Policies so promulgated under the authority of 38
U.S.C. are regulatory with no deviations, not expressly authorized
herein, to be indulged.\]