Agencies have considerable discretionary authority to provide additional compensation to support their employee recruitment, relocation, and retention efforts using Governmentwide compensation flexibilities under title 5, United States Code.  This guidance explains the reasons agencies should review their use of compensation flexibilities and provides information on assessing their effectiveness in meeting agency workforce needs.  Agencies may need to consider their current organizational environment before conducting assessments as agency realignments, staff losses, and other signification workforce changes can affect results.

Specifically, some of the benefits agencies may achieve from evaluating their use of compensation flexibilities include:

• Improving alignment between the agency’s compensation programs and any changes in the agency’s mission, goals, and objectives;
• Assessing how much compensation flexibilities help recruit and retain employees, especially those in mission critical occupations;
• Determining whether some flexibilities are more effective than others;
• Complying with laws, regulations, and agency policies;
• Potentially avoiding expensive back pay claims and litigation;
• Responding to changing labor market conditions; and
• Reducing costs by reducing or terminating payments if compensation flexibilities are no longer needed or needed at the levels originally authorized.

Frequently used compensation flexibilities

Governmentwide compensation flexibilities available to agencies under title 5, United States Code, include—

• Special rates (5 U.S.C. 5305 and 5 CFR part 530, subpart C);
• Critical position pay (5 U.S.C. 5377 and 5 CFR part 535);
• Superior qualifications and special needs pay-setting authority (5 U.S.C. 5333 and 5 CFR 531.212);
• Recruitment incentives (5 U.S.C. 5753 and 5 CFR part 575, subpart A);
• Relocation incentives (5 U.S.C. 5753 and 5 CFR part 575, subpart B);
• Retention incentives (5 U.S.C. 5754 and 5 CFR part 575, subpart C);
• Federal student loan repayment program (5 U.S.C. 5379 and 5 CFR part 537); and
• Physicians’ comparability allowance program (5 U.S.C. 5948 and 5 CFR part 595).

Additional information on these and other Governmentwide compensation flexibilities can be found in the Office of Personnel Management’s (OPM’s) guidance “Pay, Leave, and Workforce Flexibilities for Recruitment and Retention.”

Some agencies may have independent statutory authority to use different compensation flexibilities.  Agencies may also apply this guidance in assessing such independent authorities.

Reasons for assessing the use of compensation flexibilities

There are several key drivers for assessing compensation flexibilities, each supporting compliance, strategic planning, and human capital effectiveness.

1.     Strategic human capital management and HRStat reviews

An agency must use the guidelines and standards established in 5 CFR part 250, subpart B, and any metrics that OPM provides in the guidance to plan, implement, evaluate, and improve human capital policies and programs.  This may include policies and programs on pay flexibilities.  The regulations state that an agency’s human capital policies and programs must align with agency missions, goals, and strategic objectives; be based on comprehensive workforce planning and analysis; monitor and address skills gaps within governmentwide and agency-specific mission-critical occupations by using comprehensive data analytic methods and gap closure strategies; and recruit, hire, develop, and retain an effective workforce, especially in the agency’s mission-critical occupations, in addition to other criteria identified by the agency.

Three key components HRStat, the Human Capital Operating Plan (HCOP) and the Human Capital Framework (HCF) could work together to assess the use of compensation flexibilities.  Agencies conduct quarterly HRStat reviews to track human capital metrics, which could include the impact of compensation tools like recruitment and retention incentives, and special rates to close skills gaps or meet retention targets. Human Capital Framework’s (HCF) open- system design encourages agencies to adapt compensation approaches based on workforce feedback and environmental changes.  Compensation tools are evaluated against HCF standards to ensure they enhance mission outcomes (for example, using special rates to compete with private sector salaries).   HCOP serves as the foundation for compensation strategies by having agencies explicitly outline how flexibilities like retention incentives, special rates, and student loan repayments address skill gaps in mission critical roles.  Annual goals in the HCOP include measurable targets for compensation effectiveness (for example, reducing vacancy rates by using recruitment incentives). 

Each agency’s HCOP is to be reviewed and approved annually and updated as needed.  The HCOP must include an explanation of how human capital policies, initiatives, objectives, and resources will be used to achieve agencies’ human capital goals.  Using the HCOP, agencies can detail how compensation flexibilities (e.g.., superior qualifications appointments, student loan repayments) address skill gaps and align with strategic goals and objectives.  Also, each agency must participate in OPM-led Human Capital Reviews (HCR).  By integrating these components, agencies systematically evaluate whether compensation flexibilities meet workforce needs while adhering to federal standards.

2.     Human capital management evaluations

Under 5 U.S.C. 1104(b) (2) and 5 CFR parts 5 and 10, OPM is required to evaluate the effectiveness and efficiency of (1) personnel policies, programs, and operations of Executive agencies and other federal agencies subject to OPM’s jurisdiction, including their effectiveness with regard to merit selection and employee development; (2) agency compliance with and enforcement of applicable laws rules, regulations, and office directives; and (3) agency personnel management evaluation systems.  OPM and agency human capital management evaluation responsibilities should include evaluating the use of compensation flexibilities. Evaluations assess for agency compliance to applicable laws, rules, and regulations, and provide insight into the effectiveness of human capital programs such as compensation programs.  In the context of the Human Capital Framework, human capital management evaluations may also highlight areas of opportunity for the use of compensation flexibilities to support strategic development and workforce planning.

3.     Review requirements in law or regulations for certain pay flexibilities

Certain Governmentwide pay flexibilities have specific review requirements in law or regulations, which may include reports to Congress.

Special rates

Special rates are higher rates of basic pay established by OPM to address significant or likely significant difficulties in recruiting or retaining a group or category of General Schedule (GS) employees.  OPM conducts periodic reviews of existing special rates to see if they should be terminated, reduced, or increased based on recent staffing considerations.  In conducting this review, OPM relies on agencies to review special rate schedules covering their employees and respond to an annual OPM data call.  OPM asks agencies to consider staffing, labor market, and other circumstances and factors when reviewing special rate tables.  The results of the annual review are typically announced in a memorandum to agencies at the same time as annual GS base pay adjustment decisions.  (See 5 U.S.C. 5305 and 5 CFR part 530, subpart C.)

Critical position pay

At an agency’s request, OPM may, in consultation with the Office of Management and Budget, grant authority to fix the rate of basic pay for one or more positions at a higher rate than would otherwise be payable for the position.  The position under consideration must require an extremely high level of expertise in a scientific, technical, professional, or administrative field that is critical to the successful accomplishment of an important agency mission.  Agencies must submit an annual report to OPM on their use of the critical position pay authority during the previous calendar year for a report to Congress required by 5 U.S.C. 5377(h).  Agency reports must contain information on their use of critical pay including the rates paid and whether the critical pay authority is still needed.  (See 5 U.S.C. 5377 and 5 CFR part 535.)

Superior qualifications and special needs pay-setting authority

Agencies may use the superior qualifications and special needs pay-setting authority to set pay above step 1 (up to step 10) for an employee newly appointed to a GS position because of the superior qualifications of the candidate or a special need of the agency for the candidate’s services.  An agency must establish appropriate internal guidelines and evaluation procedures to ensure compliance with the law, regulations, and agency policies.  (See 5 U.S.C. 5333 and 5 CFR 531.212.)

Annual reviews of retention incentives and group recruitment incentives

For each retention incentive subject to a service agreement, agencies must review the determination to pay the incentive at least annually to ascertain whether the original determination still applies or whether payment is still warranted and must certify this determination in writing.  (5 CFR part 575, subpart C.)

For retention incentives paid when no service agreement is required, agencies must review each determination to pay the incentive at least annually to ascertain whether payment is still warranted and must certify this determination in writing.  (See 5 CFR part 575, subpart C.)

For group recruitment incentives, agencies must review each decision to target a group of similar positions for recruitment incentives at least annually to determine whether the positions are still likely to be difficult to fill and certify this determination in writing.  If an agency determines the positions are no longer likely to be difficult to fill, the agency may not offer a recruitment incentive on a group basis to a covered newly-appointed employee.  (See 5 CFR 575, subpart A.)

Federal student loan repayment program

The federal student loan repayment program permits agencies to repay federally-insured student loans as a recruitment or retention tool for candidates or current employees of the agency.  Agencies must submit an annual report to OPM on their use of student loan repayments during the previous calendar year for a report to Congress required by 5 U.S.C. 5379(h).  These reports typically include information on the number of federal employees who receive student loan repayment benefits, the job classification of each recipient, and the total dollar amount of student loan repayment benefits.  Agencies may also share information on best practices, lessons learned, program effectiveness, metrics used to measure success, or details about their use of the student loan repayment authority as an effective recruitment or retention tool. (See 5 U.S.C. 5379 and 5 CFR part 537.) 

Physicians’ comparability allowance program

An agency may pay a physicians' comparability allowance (PCA) to an eligible Government physician who enters into a service agreement with the agency to recruit and retain the physician.  Agencies must submit an annual report to OPM on their use of the PCA program during the previous fiscal year for a report to Congress required by 5 U.S.C. 5948(j).  The report must include the nature and extent of recruiting and retention problems justifying the use of the allowance by each agency, the number of physicians who entered into PCA agreements by agency, the size of the allowances and duration of the agreements, and the degree to which the allowance alleviated recruiting and retention problems.  (See 5 U.S.C. 5948 and 5 CFR part 595.)

Additional assessment purposes

Assessing the effectiveness of compensation flexibilities can serve other important agency needs.  Assessments can provide critical insight on whether the compensation tools are addressing the true targeted staffing difficulties. Assessments also support management decisions on using compensation flexibilities or whether other human resource interventions should be considered.  Evaluating compensation flexibilities can provide important information on overall and cost-benefits impact, including resource and budget considerations.

Assessment results can be used to support agency decisions to increase, reduce, or terminate use of compensation flexibilities; budget justifications and requests; and strategic and performance planning and evaluations.

4.    Assessment of factors and workforce data to evaluate the effectiveness of compensation flexibilities

Agencies may consider a number of factors and types of data when assessing the effectiveness of compensation flexibilities to meet human capital review and evaluation needs, legal review requirements, and other management needs.  

Some of the factors agencies may consider include--

• Impact on agency mission;
• Impact on agency performance goals;
• Impact on meeting workforce hiring and retention needs;
• Impact on addressing mission critical skills gap areas;
• Effectiveness relative to other human capital flexibilities (for example, other compensation flexibilities or non-compensation flexibilities);
• Impact on budget and other agency resources;
• Changes in agency missions, goals, budget, and workforce needs; and
• Impact on employees and positions where compensation flexibilities are not in use.

The types and sources of data agencies may use in assessing the effectiveness of compensation flexibilities may vary depending on the targeted positions, staffing problem, and goal of the assessment.  When evaluating whether a compensation flexibility is effective, it is important to have the relevant data on your agency’s use of the compensation flexibility and other data related to the factors above.  Agencies may authorize compensation flexibilities for specific individuals or groups of positions.  Some data, such as agency workforce data, may be more relevant for evaluating effectiveness when compensation flexibilities are authorized for a group of positions.

The following may be useful sources or types of data to consider:  

• Agency Human Capital Operating Plan;
• HRStat quarterly reviews;
• Agency workforce survey results;
• Interviews with newly-appointed employees for feedback on compensation flexibilities used for recruitment;
• Exit surveys for feedback on compensation flexibilities used for retention;
• Surveys from agency human resources, finance staff, hiring managers involved in administering and using the compensation flexibilities as well as employees who received compensation flexibilities;
• Vacancy data (number of vacant positions, vacancy rates, length of time positions are vacant, number of qualified applicants, job offer acceptance rates);
• Number of employees successfully recruited into mission critical occupations;
• Number of employees who have separated (voluntarily left federal service), transferred to other agencies, and retired;
• Evaluating the impact and utilization of compensation flexibilities
  • The number of employees authorized recruitment, relocation, and retention incentives; special rates; superior qualifications and special needs pay-setting authority; student loan repayments; and critical position pay
  • Percentage of new hires authorized a recruitment incentive or who had pay set under the superior qualifications and special needs pay-setting authority
  • Compensation flexibility utilization by occupation or occupational series, which could include occupations with the highest percentages authorized; grade or work level; and geographic location; and
  • Cost of compensation flexibilities (direct compensation costs and cost to administer) relative to savings from reduced recruitment and hiring activities, turnover, and overtime and contracting costs and other mission-related cost savings

Capturing data before and after implementation can help an agency identify if a compensation flexibility is effective.  Tracking data over time can help an agency to identify trends.  It may also be beneficial to compare data for those receiving the compensation flexibility or flexibilities to data for the agency overall or Governmentwide.

References and resources

5 U.S.C. 1103, 1104, 1402, 5305, 5333, 5377, 5379, 5753, 5754, 5948

5 CFR part 5; part 10; part 250, subpart B; part 530, subpart C; 531.212; part 535; part 537; part 575, subparts A-C; part 595

• GAO report “Federal Pay: Opportunities Exist to Enhance Strategic Use of Special Payments”
• Federal Workforce Data