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# Ch. 5 - Pay and Other Compensation

**Statute: 5 U.S.C. 5307 and 5381-5385**

**Regulations:****5 CFR Part 534, Subpart D****;****Part 530, Subpart B**

Strong performance appraisal systems provide the necessary foundation for establishing pay-for-performance systems in which an individual’s pay is directly linked to accomplishments. It is within this framework that the Senior Executive Service (SES) pay-for-performance system operates. All agencies, regardless of whether they seek certification of their performance appraisal system(s), are required to operate pay-for-performance systems for their SES cadre.

## SES Rate Range

The SES pay range has a minimum rate of basic pay equal to 120 percent of the basic pay rate for GS-15, step 1 and the maximum rate of basic pay is equal to the rate for level III of the Executive Schedule (EX-III). However, for any agency having a performance appraisal system that is certified under 5 U.S.C. 5307(d) as making, in its design and application, meaningful distinctions based on relative performance, the maximum rate of basic pay will be the rate for level II of the Executive Schedule (EX-II). The minimum rate of basic pay for the SES rate range will increase consistent with any increase in the rate of basic pay for GS-15, step 1. The applicable maximum rate of basic pay for the SES rate range will increase with any increase in the rate for levels EX-II or EX-III under 5 U.S.C. 5318.

For SES employees stationed in Alaska, Hawaii, and U.S. Territories, Section 1912 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84, October 28, 2009) provides that SES employees whose official worksite was in one of the nonforeign areas on the day before the effective date of the section (defined as the first day of the first pay period beginning on or after January 1, 2010) will receive the locality pay rate for that area. The locality rates are subject to the limitations in 5 U.S.C. 5304(g) and section 1915(b) of the Act. Employees who are assigned to SES positions in the nonforeign areas on or after the effective date are not eligible for locality payments but will be eligible for the applicable cost-of-living allowance (COLA) rate in effect for their official worksite. The nonforeign areas include Alaska, Hawaii, Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, the U.S. Virgin Islands and other islands and atolls as described in 5 CFR 591.205. For additional information see the OPM memorandum on the Nonforeign Area Retirement Equity Assurance Act, CPM 2009-27.

## **Agency Responsibilities**

### Policy Requirements

Each agency must establish a written pay policy for setting and adjusting the rates of basic pay for SES members. It may be useful to include members of both the Executive Resources Board (ERB) and the Performance Review Board (PRB) in establishing or modifying this policy so that roles and perspectives of each are properly integrated. For example, while an agency’s written pay policy should address aggregate compensation, including how pay decisions may be related to SES performance awards and incentive awards, it may not preempt the PRB responsibility to provide the agency head recommendations on SES performance awards for career appointees or the agency head’s determination of SES performance award amounts after considering those recommendations.

The pay policy must do the following:
              - It must describe the review and approval process for setting and adjusting pay, including procedures for setting pay for new appointees, pay adjustments after appraisal, and any other circumstances that may result in the setting and adjusting of pay. It must specify who has authority for pay adjustments consistent with regulatory provisions, e.g., which pay adjustments may be finalized by an authorized agency official and which require action by the agency head or the official designated by the agency head to oversee and certify the results of the agency’s SES performance appraisal system.
              - The policy must address administrative and management controls to meet the requirements of law and regulation. It should address budget issues, such as procedures for determining how available funds will be allocated among pay adjustments, performance awards and other awards or what kinds of adjustments to make in the event of budget constraints. The policy should also identify the role and nature of significant control points, external and internal, for these decisions. Below are examples of rules or control points that can affect pay adjustments and awards.                 - External:                   - Statutory, e.g., pay cap at EX-III or EX-II based upon certification status of performance appraisal system; and
                  - Regulatory, e.g., requirements for justifying a “maintain relative position” (MRP) adjustment for an executive currently paid above EX-III, or for whom the resulting rate is above EX-III. 
                - Internal:                   - Factors that, if applicable, will be used to differentiate payouts among executives who receive the same rating;
                  - Organizational performance measures that, if applicable, will be used to determine allocation of funds for performance awards or pay adjustments among components;
                  - Formulas, ratios, or limits that specify how pay adjustments and awards may be combined to recognize exceptional performance or achievements;
                  - Ranges of pay adjustments available to executives rated at certain levels; and
                  - Agency established tiers or other categorization of executive positions. 
              - The policy must provide for meaningful pay distinctions. Specifically, the policy must identify the criteria to be used to set and adjust a senior executive’s pay, including any procedures, guides, rules or benchmarks that may be applied in setting and adjusting pay at levels above EX-III. SES pay-for-performance systems must avoid any quotas or forced distribution of performance ratings; however, pay differentiation based on performance ratings should be evident and applied consistently so that the highest performers receive the highest rewards. Agencies must provide transparency in the pay decision process and will communicate the results to demonstrate the correlation between executive excellence and desirable pay outcomes.

### Considerations When Creating Pay Policy

Although the SES is established as a rank-in-person system, an agency’s pay policy may incorporate the concept of “position value.” This could, for example, involve establishing tiers of positions with distinct pay rules, ranges or limits, or accommodating other ways to include factors such as scope of responsibility, degree of accountability, and position in the organization. At the top levels of an organization, the personal qualifications and performance of an executive are often critical to the success or failure of a key program, and executives in these positions should be paid accordingly.

Pay is also a key element in the recruitment and retention of executives. In this regard, agencies may factor into their pay-setting decisions such elements as qualifications and level of expertise, scarcity of qualified personnel, and compensation levels for comparable executive positions in the private sector.

Agencies should inform their SES members how their pay system works. Even the best-designed pay system can fail if not implemented properly, and a major aspect of any successful system is effective communication about the workings of the system and its results.

## **Setting Individual Pay Rates**

### Initial Appointment to the SES

Agencies have broad discretionary authority to set pay on initial entry to the SES. An agency may set the rate of basic pay of a newly appointed SES member at any rate within the SES rate range, subject to the following limitations:
              - In an agency with a certified performance appraisal system, rates of basic pay above the rate for EX-III but less than or equal to the rate for EX-II are generally reserved for those newly appointed executives who possess superior leadership or other competencies.
              - If an individual receiving an initial career appointment in the SES has at least 5 years of current continuous service in one or more positions in the competitive service and is appointed without any break in service, the basic pay rate may not be less than the rate of basic pay (including any applicable locality payment, special rate supplement, or similar payment or supplement) last payable to the individual immediately before appointment.

The agency must determine the appropriate rate of pay based on the nature and quality of the individual’s experience, qualifications, and accomplishments as they relate to the requirements of the SES position, as well as the individual’s current responsibilities.

Example: In November 2019, a GS-15/4 employee in the Washington, DC area was appointed to an SES position.

Calculations

             GS-15/4 salary (includes locality pay) prior to SES appointment:                     $ 151,633                 6% pay increase per agency’s general policy for new SES appointments:        $     9,098

                                                                                                                                        Subtotal:   $ 160,731

Jan 2020 projected 2.6% increase in the SES rate range. Given the appointment occurs in November, the executive will not have time to satisfy the minimum period of performance (90 days) necessary to receive a performance rating and an increase to maintain his/her relative position in the SES rate range. The agency may exercise discretion to incorporate into the initial SES rate an amount equivalent to the projected increase in the SES rate range.

                                                  Projected SES rate range increase (2.6%):                      $     4,179

                                                                                                                        Total:                     $ 164,910

The agency reviewed the individual’s experience, qualifications, and accomplishments and made the determination to set pay at $164,910.

### Following a Break in SES Service

Upon reappointment to the SES, an authorized agency official may set the rate of basic pay of a former senior executive at any rate within the SES rate range, subject to the limitations in 5 CFR534.403(a), if there has been a break in SES service of more than 30 days.

If there has been a break in SES service of 30 days or less, the senior executive’s rate of basic pay may be set at any rate within the SES rate range (without regard to whether the employee received a pay adjustment during the previous 12-month period), but not higher than the senior executive’s former SES rate of basic pay. However, the agency head or designee who performs the functions described in (a)(5) and (6) (including the Inspector General, where applicable) may approve a higher rate 5 CFR 430.404 than the senior executive’s former rate of basic pay, if warranted.

This may be supported where necessary to recruit an executive with superior leadership or other competencies from a position outside the agency or to reacquire the service of an executive whose services are critical to the agency. Factors used in deciding upon an exception to the 12-month rule under 5 CFR 534.404(c)(4)(ii) or (iii) may be applicable.

Setting a rate of basic pay upon reappointment to the SES is considered a pay adjustment for purposes of applying the 12-month rule at 5 CFR 534.404(c).

### Upon Reinstatement from a Presidential Appointment Requiring Senate Confirmation

The following provisions apply to a former career senior executive who is reinstated under 5 CFR 317.703:
              - If the individual elected to remain subject to the SES pay provisions while serving under a Presidential appointment, his or her SES rate may be adjusted upon reinstatement, either in the agency where the individual held the Presidential appointment or in another agency, if at least 12 months have elapsed since the employee’s last SES pay adjustment.
              - If fewer than 12 months have elapsed since the employee’s last SES pay adjustment, an authorized agency official may approve an additional pay increase under  5 CFR 534.404(c)(4)  if the agency head or the official designated to oversee and certify the results of the agency’s SES appraisal system determines the additional pay increase is warranted.
              - Any pay adjustment must be made in accordance with paragraphs (b), (d), and (e) of  5 CFR 534.404  and the agency’s plan for setting and adjusting SES rates of pay required by  5 CFR 534.404(g) .
              - If the individual did not elect to remain subject to the SES pay provisions while serving under a Presidential appointment, his or her SES rate may be set upon reinstatement at any rate within the SES rate range, subject to the limitations in  5 CFR 534.403(a) .
              - Setting a rate of basic pay upon reinstatement to the SES under this section is considered a pay adjustment under  5 CFR 534.404(c) .

### Upon Transfer

A senior executive is **not**entitled to retain his or her rate of pay upon transfer to another agency, except in the case of an executive transferring under circumstances described in the next paragraph. An authorized agency official may set the pay of a senior executive transferring from another agency at **any rate**within the SES rate range, subject to the limitation on the maximum rate of basic pay in 5 CFR 534.403(a). If the executive considering the transfer is not satisfied with the proposed rate of pay, the executive need not accept the position. If pay is set at the same SES rate the senior executive received in his or her former agency, the action is not considered a pay adjustment for the purpose of applying 5 CFR 534.404(c). If pay is set at a rate higher than that held in the former agency, the pay action initiates a new 12-month restriction. If pay is to be increased upon transfer within 12 months of the executive’s last pay adjustment, the agency should first document an exception to the 12-month rule under 5 CFR 534.404(c)(4)(ii) and (c)(5), i.e., to recruit an executive with superior leadership or other competencies from a position in another agency.

A senior executive whose rate of basic pay is higher than EX-III may not suffer a reduction in pay as a result of transferring to an agency where the maximum rate of basic pay for the applicable SES rate range is equal to EX-III. The senior executive will continue to receive his or her current SES rate but is not eligible for a pay adjustment until the senior executive is assigned to a position that would allow the employee to receive a pay adjustment, such as reassignment from a position in a component with a non-certified appraisal system to a position in a component with a certified appraisal system, or the employing agency’s applicable performance appraisal system is certified. The SES rate of pay is not considered a retained rate of pay for the purpose of applying 5 U.S.C. 3594 and 5 CFR part 359, subpart G, or 5 U.S.C. 5363 and 5 CFR 536, subpart C.

## Adjusting Individual Pay Rates

An agency may adjust (increase or reduce) the rate of basic pay of a senior executive consistent with the agency’s plan for setting and adjusting SES rates of basic pay. When adjusting the rate of basic pay for noncareer appointees, it is recommended that the agency’s Office of White House Liaison be consulted.

### Performance-Based Pay Increase

An agency may provide a pay increase to allow a senior executive to advance his or her relative position within the SES rate range only upon a determination by the authorized agency official that the executive’s individual performance and/or contribution to agency performance so warrant. (See 5 CFR 534.404(b)(3)). A senior executive who receives an annual summary rating of Outstanding (or equivalent) must be considered for an annual pay increase. A senior executive who receives an annual summary rating of less than Fully Successful (or equivalent) may not receive a pay increase for the current appraisal period. OPM expects that executives who are paid at a rate that is consistent with their current level of responsibilities and performance and who receive an acceptable (Fully Successful or higher) annual summary rating will receive a performance-based pay increase. A pay increase of any amount that is granted under 5 CFR 534.404(b)(3) restarts the clock under the 12-month rule.

### 12-Month Rule

An agency may not adjust the rate of basic pay of a senior executive more than once during any 12-month period, except as provided by regulation. Provisions at 5 CFR 534.404(c)(2) identify pay adjustments that are subject to the 12-month rule, including setting an individual’s rate of pay upon initial appointment, reappointment, or reinstatement, and, generally, any other increase or reduction in a senior executive’s rate of pay. However, certain pay actions are identified in 5 CFR 534.404(c)(3) that are not considered pay adjustments for purposes of the 12-month rule; and 5 CFR 534.404(c)(4) provides conditions under which the head of an agency – or the official designated to oversee and certify the results of the agency’s SES appraisal system – may authorize a pay increase even though an applicable 12-month waiting period has not expired.

### Pay Actions that Do Not Count Against the 12-Month Rule

The head of the agency or appropriate authorized agency official can take certain pay actions (including actions that increase an executive’s pay) that are not considered pay adjustments for the purpose of applying the 12-month rule. The following pay actions may be taken whether or not the employee received a pay adjustment during the previous 12-month period and do not initiate a new 12-month period.
              - The conversion of senior executives to the new SES pay system under  5 CFR 534.406  and the conversion of other employees to equivalent senior executive positions ( 5 CFR 534.404(c)(3)(i) );
              - A determination by an authorized agency official to make a zero adjustment in pay after considering an executive’s annual summary rating ( 5 CFR 534.404(c)(3)(ii) );
              - A determination to provide an additional pay increase under the circumstances specified in  5 CFR 534.404(f)(1)  or  (2)  when there is an increase in Executive Schedule rates of pay ( 5 CFR 534.404(c)(3)(iv) );
              - A determination to provide a pay increase under  5 CFR 534.404(b)(4)  that is equal to or less than the amount needed to maintain the relative position of a senior executive’s rate of basic pay within the SES rate range ( 5 CFR 534.404(c)(3)(vi) ); and
              - An increase in pay equivalent to the minimum amount necessary to ensure that a senior executive’s rate of basic pay does not fall below the minimum rate of the SES rate range ( 5 CFR 534.404(c)(3)(vii) ).

### Exceptions to the 12-Month Rule

The head of an agency or designee who performs the functions described in 5 CFR 430.404(a)(5) or (6) has the authority (under 5 CFR 534.404(c)(4)) to make exceptions to the 12-month rule where he or she determines that an additional increase is warranted. These include—
              - for an exceptionally meritorious accomplishment that significantly contributes to the agency’s performance;
              - for a senior executive who is reassigned to a position with substantially greater scope and responsibility [ Note:  A performance appraisal and rating are necessary to document the basis for a pay increase upon a senior executive’s reassignment to a position with substantially greater scope and responsibility. The exception to the 12-month rule at  5 CFR 534.404(c)(4)(ii)  only provides authority to forgo the otherwise required 12-month waiting period.];
              - for a senior executive with superior leadership or other competencies that is recruited from a position in another agency;
              - for a senior executive who is critical to the mission of the agency and who would be likely to leave the agency in the absence of a pay increase; or
              - to align a senior executive with the agency’s senior executive appraisal and pay adjustment cycle (e.g., in the case of a senior executive who was appointed to an SES position within the past 12 months or a senior executive who was transferred to an SES position from an agency with a different senior executive appraisal and pay adjustment cycle within the past 12 months). A pay increase that is made as a result of a determination to approve an exception to the 12- month rule must be documented in writing. It is considered a pay adjustment and begins a new 12-month period.  An executive is not entitled to receive an exception under 5 CFR 534.404(c)(4)(iv) to re-align the executive with the agency’s senior executive appraisal and pay adjustment cycle because he or she receives a pay increase under 5 CFR 534.404(c)(4)(i)(ii), or (iii), which initiates a 12-month waiting period that will not expire before the current cycle ends. If an exception is granted to re-align the executive, the agency head or designee should document under 5 CFR 534.404(c)(5) how the reduced period of performance during the cycle (i.e., since the last pay increase) was considered in calculating any pay increase. 

### Maintain Relative Position in the Rate Range

When the minimum or maximum rate of basic pay of the SES rate range is increased (typically during the first pay period beginning on or after January 1), an agency may choose to increase the basic pay of fully performing senior executives (those who meet or exceed performance expectations as reflected in their performance rating) by an amount that does not exceed the amount necessary to allow the executive to maintain his or her relative position in the SES rate range (5 CFR 534.404(b)(4)). As previously stated, a pay increase to maintain relative position in the SES rate range (MRP) is not considered a pay adjustment for the purpose of applying the 12-month rule. An MRP adjustment may be made separately from a pay increase that results in a senior executive advancing his or her relative position in the SES rate range.

Agencies should be aware of the regulatory requirements and limitations associated with granting MRPs as listed in 5 CFR 534.404(b)(4)(i)-(iii) and summarized in the following table:

A pay increase to allow an employee to maintain his or her relative position in the SES rate range is effective on the date the minimum and/or maximum rate range for the SES is adjusted (i.e., the first day of the first pay period beginning on or after January 1). Decisions to increase pay made during the first full pay period in January may be made effective on the first day of that pay period if the pay increase was officially approved no later than the end of the first full pay period.

To accurately calculate a pay increase intended to maintain an employee's relative position in the pay range, agencies must use the following process. The process applies whether the minimum and maximum rates of the range are adjusted by the same amount or different amounts.

Example: The minimum and maximum rates of the SES rate range are adjusted by 2.6 percent. The example assumes the agency's performance appraisal system for senior executives is certified, allowing for a maximum pay rate equivalent to EX-II.

#### Calculations

**Step 1:** Subtract the minimum rate of the range for the employee's position in effect on the day immediately preceding the pay adjustment from the employee's rate of basic pay on the day immediately preceding the pay adjustment.

     $157,594 - $127,914 = $29,680

**Step 2:** Subtract the minimum rate of the range in effect immediately preceding the pay adjustment from the maximum rate of that rate range.

     $192,300 - $127,914 = $64,386

**Step 3:** Divide the result of step 1 by the result of step 2. Carry the result to the seventh decimal place and truncate.

     $29,680/$64,386 = 0.4609697

**Step 4:** Subtract the minimum rate of the new rate range from the maximum rate of the new rate range.

     $197,300 - $131,239 = $66,061

**Step 5:** Multiply the result of step 3 by the result of step 4. Round to the closest whole dollar amount.

     0.4609697 x $66,061 = $30,452

**Step 6:** Add the result of step 5 to the minimum rate of the new rate range.

     $131,239 + $30,452 = $161,691

This is the executive's new rate of basic pay preserving his/her relative position in the pay range.

## Restrictions on Reducing Pay

A senior executive whose rate of basic pay is higher than the rate for EX-III may not suffer a reduction in pay as a result of:
              - transferring to an SES position in an agency where the maximum rate of basic pay for the applicable SES rate range is equal to the rate for EX-III; or
              - a decision to suspend certification of the applicable performance appraisal system.

The senior executive will continue to receive his or her current SES rate and is not eligible for a pay adjustment until the employing agency’s applicable performance appraisal system is certified or the senior executive is assigned to a position that would allow a pay adjustment. For example, if the executive was reassigned from a position in a component with a non-certified appraisal system to a position in a component with a certified appraisal system.

An authorized agency official may reduce a career senior executive’s SES rate of basic pay by not more than 10 percent for performance or disciplinary reasons, subject to the restrictions on reducing the pay of career senior executives in 5 CFR 534.406(b) and 534.404(c) (i.e., the 12-month rule) and on setting pay below the minimum rate of the SES rate range in 5 CFR534.403(a).

The SES rate of basic pay of a career senior executive may be reduced without the employee’s consent by the senior executive’s agency or upon transfer of function to another agency only—
              - If the senior executive has received a Minimally Satisfactory or Unsatisfactory annual summary rating under  5 CFR part 430, subpart C , or has otherwise failed to meet the performance requirements and standards for a critical element as defined in  5 CFR 430.303 ; or
              - As a disciplinary or adverse action resulting from conduct-related activity, including, but not limited to, misconduct, neglect of duty, or malfeasance.

Pay reduction may, if determined appropriate by the agency, be used alone or in combination with other responses to poor performance or to circumstances warranting disciplinary action. However, it may not be used in place of any action required by statute, e.g., reassignment or removal from the SES due to an annual summary rating of Unsatisfactory, removal from the SES due to two less than Fully Successful ratings within three years or removal due to two Unsatisfactory annual summary ratings within five years.

**Prior to reducing**a senior executive’s rate of basic pay, whether for performance or disciplinary reasons, the agency must provide the senior executive with the following:
              - written notice of such reduction at least 15 calendar days in advance of its effective date;
              - a reasonable period of time, but not less than seven calendar days, for the senior executive to respond to such notice orally and/or in writing and to furnish affidavits and other documentary evidence in support of that response;
              - an opportunity to be represented in the matter by an attorney or other representative;
              - a written decision and specific reasons for the reduction at the earliest practicable date after the senior executive’s response; and
              - an opportunity to request, within seven calendar days after the date of that decision, reconsideration by the agency’s head, whose determination with respect to that request will be final and not subject to further review.

Reductions in pay under 5 CFR 534.404(j) are not appealable under 5 U.S.C. 7543.

## Aggregate Limitation on Pay

Under 5 CFR 530.203(b), an executive’s aggregate compensation received in any given calendar year may not exceed the rate of pay for level I of the Executive Schedule (EX-I) or the rate payable to the Vice President (under 3 U.S.C. 104) at the end of the calendar year, whichever is applicable to the employee based on the certification status under 5 CFR part 430, subpart D, of the performance appraisal system covering that executive.

Aggregate compensation for SES employees includes basic pay and certain payments made under the authority of title 5, United States Code, such as rank and performance awards, physicians’ comparability allowances, recruitment, relocation, and retention incentives, and other similar payments (5 CFR 530.202).

An agency with a certified appraisal system may pay aggregate compensation in an amount up to the Vice President’s salary. An agency that does not have a certified appraisal system must limit aggregate compensation to the rate for level I of the Executive Schedule. Any excess amount is carried over and paid as a lump sum at the beginning of the next calendar year. The excess payment must be taken into account when applying the applicable aggregate limitation for the new calendar year.

If a performance award, rank award, or other additional payment, when added to basic pay, would cause an executive’s aggregate compensation to exceed the applicable aggregate limitation by the end of the calendar year, the excess amount is withheld from the award or other additional payment subject to the aggregate pay limit, rather than from the individual’s basic pay. The withheld excess amount will be paid at the beginning of the following calendar year, unless such payment would cause the employee’s aggregate compensation to exceed the limit for that new calendar year. Basic pay counts toward the aggregate limitation on pay, but basic pay itself is not reduced or withheld.

If an executive whose aggregate compensation will exceed the applicable aggregate limitation transfers to another agency, payment of any excess amount shall be made at the beginning of the next calendar year, not at the time of transfer, by the gaining agency. The previous employing agency must provide a fund transfer to the gaining agency. The gaining agency should keep a record of the payment since it counts against the employee’s aggregate limitation for the new calendar year.

If the applicable aggregate limitation changes during a calendar year (e.g., due to a lapse in agency performance appraisal system certification), agencies must review any performance, rank award, or other additional payment subject to the aggregate pay limit that was paid before the new aggregate limitation was effective where the agency was required to withhold part of the payment because of the aggregate limitation that then existed. The agency shall then pay any part of the withheld payment that does not exceed the new aggregate limitation. If an SES member’s pay rate also changed, the agency should first recalculate the executive’s aggregate compensation for the calendar year using the new rate and any award money previously paid. (See 5 CFR 530.203(g) and (h) for information on re-determining an employee’s aggregate compensation and excess payments in such situations.)

## **Other Pay Provisions**

### Premium Pay

SES members are excluded from the premium pay provisions of 5 U.S.C. chapter 55, subchapterV (such as overtime pay, Sunday premium pay, holiday premium pay, night pay, standby duty pay, and hazardous duty pay) by 5 U.S.C. 5541(2)(xvi). As a result, SES members are also excluded from earning compensatory time off in lieu of overtime pay, as allowed for other employees under 5 U.S.C. 5543. [See Chapter 11 for more information on compensatory time off.]

### Pay Following Placement Outside the SES

**Saved pay.**If a career appointee is entitled to guaranteed placement in a position outside the SES when removed during the probationary period for performance, or as the result of a reduction in force, saved pay is provided under 5 U.S.C. 3594. If the individual is placed in a General Schedule position, the saved pay is subject to the limitation on SES pay under 5 U.S.C. 5382 of Executive Schedule level II. [See Chapter 10 for more information on saved pay.]

**Retained rate.**If an appointee is not eligible for saved pay under 5 U.S.C. 3594 following separation from the SES and is placed in a General Schedule position, the individual may still be eligible for pay retention under 5 CFR 536.301(a)(4), which states that the head of an agency must provide pay retention to an eligible employee whose payable rate of basic pay would otherwise be reduced as the result of a management action, as defined in 5 CFR 536.103. (See list of employees excluded from pay retention at 5 CFR 536.102(b).)

[**Note:**The termination of a noncareer SES appointment (or voluntary resignation in anticipation of such termination) because of a change in agency leadership is not a management action.]

When initially established, a retained rate may not exceed (1) 150 percent of the maximum rate of basic pay of the highest applicable rate range payable for the grade of the employee’s position of record or (2) EX-IV. At no time may a retained rate exceed Executive Schedule level IV. There are exceptions for former National Security Personnel System employees with a pay rate determinant code Y and certain employees in nonforeign areas as provided in 5 CFR 536.310(a).

Examples of individuals who may be eligible for retained pay under the management action provision include a career SES member who voluntarily accepts a GS-15 position following receipt of a notice of position abolishment, a notice of directed geographic reassignment (if there is no mobility agreement), or other management action that causes or influences the employee to move to a lower-paid position.

However, an employee is not eligible for pay retention if placement in the General Schedule is at the employee’s request, i.e., placement is voluntary and not the result of a management action. Nor is an employee eligible if the employee declines a reasonable offer, as defined in 5 CFR 536.104.

**Maximum payable rate.**If an SES member takes a position in the General Schedule at the member’s request and is not eligible for saved pay, the individual may be paid under the “maximum payable rate” rule, as determined by the agency.

Individuals serving on a limited term appointment who return to the General Schedule are not eligible for retained pay, but they may have pay set under the “maximum payable rate” rule, as determined by the agency. It does not matter whether the return to the General Schedule is voluntary or is the result of a management decision. However, the SES appointment must have been for more than 90 days, even though the appointee may have not actually served that long. In determining the General Schedule rate, agencies may take into account such factors as how long the individual served under the limited appointment and what the individual’s pay would have been had the individual remained in the General Schedule. (See 5 CFR 531.221 – 531.223 for additional information.)

Example: In 2020, an SES employee in Washington, DC voluntarily moves to a GS-15 position in Washington, DC. The employee’s SES annual salary of $155,000 is the highest previous rate. To calculate the maximum payable rate, compare $155,000 with the highest applicable rate range as if the employee held the GS position. Identify the lowest step in that range equal to or higher than $155,000. In this example, the highest applicable rate range is the DC locality rate schedule. GS-15, step 4 is the employee’s maximum payable rate. Pay may be set at any rate in the GS-15 rate range up to step 4.

*Rate limited to the rate for level IV of the Executive Schedule (5 U.S.C. 5304(g)(1)).

### Pay for Employees on Detail or Transfer to an International Organization

An agency must consider any employee on detail or transfer to an international organization for all pay increases for which the employee would be considered if not absent. An increase is effective on the date it would have been made were the employee not absent.

### Recruitment, Relocation, and Retention Incentives

**Recruitment.**An agency may pay a recruitment incentive to a newly appointed senior executive (excluding a noncareer appointee) if the agency has determined that the position is likely to be difficult to fill in the absence of an incentive. For this purpose, “newly appointed” is defined at 5 CFR 575.102 and refers to an individual newly appointed to the Federal Government rather than an individual newly appointed to the SES. A recruitment incentive may not exceed 25 percent of the executive's annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be increased to 50 percent (based on a critical agency need) as long as the total incentive does not exceed 100 percent of the executive's annual rate of basic pay at the beginning of the service period.

**Relocation.**An agency may pay a relocation incentive to a current senior executive (excluding a noncareer appointee) who must relocate to accept a position in a different geographic area if the agency determines that the position is likely to be difficult to fill in the absence of an incentive. A relocation incentive may be paid only when the executive's annual summary rating under an official performance appraisal or evaluation system is at least Fully Successful or equivalent. A relocation incentive may not exceed 25 percent of the executive's annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be increased to 50 percent (based on a critical agency need) as long as the total incentive does not exceed 100 percent of the executive's annual rate of basic pay at the beginning of the service period.

**Retention.**An agency may pay a retention incentive to a current senior executive (excluding a noncareer appointee) if (1) the agency determines that the unusually high or unique qualifications of the executive or a special need of the agency for the executive's services make it essential to retain the executive, and that the executive would be likely to leave the Federal service in the absence of a retention incentive; or (2) the agency has a special need for the employee’s services that makes it essential to retain the employee in his or her current position during a period of time before the closure or relocation of the employee’s office, facility, activity, or organization and the employee would be likely to leave for a different position in the Federal service in the absence of a retention incentive. A retention incentive may be paid only when the executive's annual summary rating under an official performance appraisal or evaluation system is at least Fully Successful or equivalent. A retention incentive rate, expressed as a percentage of the executive’s rate of basic pay, must not exceed 25 percent. With OPM approval, this cap may be increased to 50 percent (based on a critical agency need).

Recruitment, relocation, and retention incentives are not considered a part of basic pay for any purpose. Detailed information, including examples and payment methods, is available on OPM's Fact Sheets.

### Pay for Military and Civilian Retirees

Generally, when a military retiree becomes a Federal employee there is no reduction in his or her Federal pay or retirement pay or annuity. However, paid work may reduce Social Security retirement, survivor or disability benefits if earnings exceed the established limits.

If a civilian retiree is reemployed, his or her salary is generally reduced, or the annuity is terminated. However, in accordance with the National Defense Authorization Act (NDAA) for Fiscal Year 2010, the head of an agency is authorized to grant their own dual compensation (salary off-set) waivers on a temporary basis under specified circumstances. Agencies must adhere to the following conditions:
              - Agencies must report to OPM on their use of this authority no later than February 1, 2010, and no later than February 1 of each year through 2015 (the NDAA for FY 2015 extended this authority until December 31, 2019, and the NDAA for FY 2020 extends this authority until December 31, 2024);
              - Appointments are limited to one-year or less;
              - Hours worked by any annuitant reemployed under these provisions are limited to 520 during the first six months of retirement, 1,040 during any 12-month period, and 3,120 for total hours worked during any period;
              - Reemployment may not exceed 2.5 percent of the full-time workforce at any time, and if 1 percent is exceeded agencies are required to provide a justification and a succession plan to the Congress and OPM; and

OPM recommends using the SES reinstatement hiring authority, instead of the limited term or emergency hiring authority, when authorizing a dual compensation waiver under the NDAA 2010 provisions for an individual filling an SES position. Using the SES reinstatement authority enables an agency head to act without prior OPM review, consistent with the law’s requirement to provide justification and a succession plan to OPM if the number of such waivers exceeds 1 percent of the agency’s number of employees. It also avoids an agency having to satisfy limited term and emergency criteria as well. Limited term and emergency appointments are also non-renewable by law.

An agency head may use the limited time dual compensation waiver authority for career reinstatement if the appointment does not exceed one year, the appointee is notified up front of the duration, and duration is properly documented. Given that by law a reemployed annuitant (i.e., an employee whose annuity under subchapter III of chapter 83 of title 5, United States Code was continued on reemployment in an appointive position on or after October 1, 1956) serves at the pleasure of the agency head, an agency head may direct that an annuitant’s appointment will not exceed one year. On the SF-50 documenting the appointment, an agency should include a remark that states the appointment is not to exceed 1 year. An individual accepting the appointment must be notified up front that the appointment will not exceed one year.

For more information, see the OPM memorandum, Policy Guidance on the Reemployment of Civilian Retirees Under the National Defense Authorization Act for Fiscal Year 2010 date December 9, 2011.

### Critical Position Pay

Critical position pay may be granted only for positions that require expertise of an extremely high level in a scientific, technical, professional, or administrative field, and are critical to the accomplishment of an agency’s mission, and only to the extent necessary to recruit or retain an individual exceptionally well qualified for the position. Critical position pay may be set up to level II of the Executive Schedule or level I of the Executive Schedule in exceptional cases under 5 U.S.C. 5377. Pay above level I must be approved by the President. Agencies wishing to use the critical pay authority should review 5 CFR 535. All requests must be submitted to OPM which, in consultation with OMB, will make the determination to approve such a request. For additional information, see OPM’s fact sheet. 

### Pay for SES Positions Included under 5 U.S.C. 5314 - 5316

Pay for SES positions that are included under 5 U.S.C. 5314 – 5316 is not restricted by the level of pay established by law for the corresponding Executive Schedule level. Pay for SES positions is determined in accordance with SES pay provisions.