CHAPTER 5: PAY FOR PERFORMANCE MANAGEMENT SYSTEM (PPMS)

5-1. Responsibilities
5-2. Interns
5-3. Performance Objectives
5-4. Performance Elements
5-5. Mid-Year Review
5-6. Performance Appraisals
5-7. Performance Review Meeting Between Employee and Supervisor
5-8. Evaluation Feedback Meeting Between Employee and Supervisor
5-9. Minimum Rating Period
5-10. Annual Rating Periods
5-11. Official Rating Chain
5-12. Employee Feedback on Supervisor's Performance
5-13. Special Requirements
5-14. General
5-15. Performance Pay Increases and/or Performance Bonuses
5-16. Awards
5-17. Impact of Promotions on Performance Increases/Bonuses
5-18. Supervisory Bonus
5-19. Pay and Compensation Ceilings

Section I - General

5-1. Responsibilities

Performance management is an inherent responsibility for all those in positions of leadership. Those being rated also have significant roles and responsibilities. Specifically,

The Commander MRDC is responsible for executing and managing the success of the PPMS.
The Personnel Management Board (PMB) will:
1. Develop and recommend to the Commander, USAMRDC Personnel Management Policy and oversee its implementation.
2. Oversee and monitor the operation of the Personnel Demonstration Project.
3. Ensure that all employees are treated in a fair and equitable manner in accordance with all policies, regulations, and guidelines covered under the demonstration project.
Commanders and Directors will:
1. Formulate and execute the civilian pay budget.
2. Determine the composition of the pay-for-performance pay pools.
3. Provide guidance to pay pool managers.
4. Administer funds allocation to pay pool managers.
5. Manage the award pools.
6. Select participants for the Expanded Developmental Opportunities Program, long term training, and any special developmental assignments.
7. Adhere to guidelines concerning the promotion of employees into salary designated "high grades".
8. Ensure in-house budget neutrality to include tracking of average salaries, full time equivalents (FTEs), etc.
9. Contact the PMB designee for problem resolution, recommending changes in policy/procedure, etc.
10. Determine hiring and promotion salaries as well as exceptions to pay-for-performance salary increases.
11. Ensure that all employees are treated in a fair and equitable manner in accordance with all policies, regulations, and guidelines that cover this project.
Pay Pool Managers are appointed by each Commander/Director and are responsible for managing the allocated pay pool. They also ensure timely completion of performance appraisals and must certify in writing to the Commander/Director no later than 45 days following the end of the rating period that all performance appraisals have been completed. Additionally, pay pool managers may request approval from the Commanders/Directors to grant a performance pay increase to an employee that is higher than the compensation formula to recognize extraordinary achievement.
Senior Raters are responsible for communicating organizational goals to subordinates and for conducting meetings to familiarize employees with the pay-for-performance system. They are also responsible for assessing individual contributions in the broader perspective of overall mission accomplishment. In fulfilling these responsibilities, they will approve performance appraisals in a timely manner, assuring accuracy and compliance with the requirements. They will resolve disagreements between supervisors and employees and will consider performance appraisals and ratings when making personnel management and pay decisions.
Rating Supervisors are responsible for assigning work and for working with employees in establishing job-related performance objectives. They provide information to and obtain feedback from employees on goals and priorities, performance, and professional development plans. To accomplish their responsibilities, supervisors will:
1. Identify the performance rating chains to their employees. Explain if and how any individuals who are not in the official supervisory chain but who assign work and/or monitor the employee's performance will be involved in rating the employee's performance. If any individuals, other than the official supervisory chain, are involved in rating the employee's performance, their written input will be submitted to the rating supervisor and will be based on result(s) of tasking(s).
2. Communicate organizational goals and priorities to employees at the beginning of each rating period, at the mid-point in the rating period, and informally throughout the rating period.
3. Develop initial performance objectives within 30 days following the start of a review period, and work with employees in establishing individual performance and professional development goals and expectations that should be attainable and that reflect organizational needs. Performance objectives should be outcome oriented and measurable.
4. Establish with each employee the appropriate weight for each performance element in accordance with Section II of this chapter. Decisions about element weights will be recorded on the reverse side of the Performance Objectives Worksheet at Appendix G, Attachment 1.
5. Conduct formal performance-related discussions at the mid-point of each rating period and at any other time that the need arises. Provide informal feedback and get employee input on performance expectations and accomplishments throughout the rating period.
6. Prepare timely written performance appraisals that accurately assess the employee's performance when measured against generic performance elements.
7. Conduct the performance review meeting and the evaluation feedback meeting to inform the employee of management's appraisal of the employee's performance, performance score and rating, and recommend pay increase, bonus, award, or other personnel action.
8. Notify in writing all employees that receive an F rating. Prepare a structured Performance Improvement Plan (PIP) that identifies the unacceptable performance and the period of time for improvement for those employees and forward to the senior rater for approval.
9. Monitor progress on achieving the objectives delineated in the PIP, conduct a re-evaluation, and recommend appropriate action (termination, reassignment, or pay adjustment) to the senior rater.
Employees are responsible for understanding organizational expectations and discussing their ideas about the work and professional development goals with their supervisor. They are responsible, as well, for performing to the best of their abilities. In fulfilling these responsibilities, employees will:
1. Take an active role in developing their performance and professional development objectives.
2. Try to accomplish their objectives, and inform their supervisor when they have questions and/or needs, when problems occur or when they believe work processes could be improved.
3. Provide their supervisor with timely feedback on their accomplishments so that the supervisor can use them in preparing performance appraisals.
The CPAC is responsible for supporting the MRDC participating laboratories and other activities in implementing and administering a viable and constructive PPMS. In fulfilling this responsibility, they will:
1. Advise and assist supervisors in executing their daily performance management responsibilities and keep the Commanders/Directors informed of program status and program improvements that are needed.
2. Train or arrange training for supervisors and disseminate information to employees concerning the PPMS.
The CPOC will input performance rating data into a computerized database and file performance appraisals in the employee's Official Personnel Folder.

5-2. Interns

The career development and compensation for interns will be in consonance with their individual Intern Plans. The provisions of their plans will be generally in accordance with those of DA interns. Interns must be rated B or better on their performance appraisals to receive pay raises and/or promotions.
Interns will be appraised in accordance with the pay-for-performance management system described herein. At the six-month point in the rating cycle for each year of the internship and in conjunction with the in-progress review, interns will be given a special performance appraisal to determine their eligibility for a pay raise and/or promotion in accordance with their Intern Plan, and regulatory and qualification requirements.
Pay pool managers may request approval from the Commander/Director or their designee to grant a performance pay increase/performance bonus to an intern that is higher than the compensation formula. This will permit accelerated compensation within paybands and is a management tool to attract and retain quality interns.

Section II - Performance Evaluation System

5-3. Performance Objectives

Employees and supervisors will jointly develop performance objectives. These objectives will be based on and reflect the types of duties and responsibilities expected at the respective payband.

The performance objectives, representing joint efforts of employees and their rating chains, should be in place within 30 days after the beginning of each rating period.
Objectives may be modified during the rating period as necessary to reflect significant changes.
Performance objectives are recorded on the form at Appendix G, Attachment 1 and become effective on the date the senior rater initials the form.

5-4. Performance Elements

Performance elements are generic attributes of job performance, such as technical competence, that an employee exhibits in performing job responsibilities and associated performance objectives. Each performance element is assigned a weight, in multiples of five, between a specified range. The total weight of all performance elements in a performance plan is 100 points. The supervisor, following a discussion with the employee, assigns each element some portion of the 100 points in accordance with its importance for mission attainment. As a general rule, essentially identical positions will have the same critical elements and the same weight. These weights will be developed along with employee performance objectives and recorded on the reverse side of the form at Appendix G, Attachment 1. All employees will be rated against at least the five generic performance elements listed through e. below. All of these elements are critical. In case of disagreements, the decision of the rater will prevail. Only those employees whose duties require manager/leader responsibilities will be rated on element f. Supervisors will be rated against an additional critical performance element, listed at g. below:

Technical Competence. Exhibits and maintains current technical knowledge, skills, and abilities to produce timely and quality work with the appropriate level of supervision. Makes prompt, technically sound decisions and recommendations that add value to mission priorities and needs. For appropriate career paths, seeks and accepts developmental and/or special assignments. Adaptive to technological change. (Weight range: 15 to 50).
Working Relationships. Accepts personal responsibility for assigned tasks. Considerate of others' views and open to compromise on areas of difference, if allowed by technology, scope, budget, or direction. Exercises tact and diplomacy and maintains effective relationships, particularly in immediate work environment and teaming situations. Always willing to give assistance. Shows appropriate respect and courtesy. (Weight Range: 5 to 15).
Communications. Provides or exchanges oral/written ideas and information in a manner that is timely, accurate and cogent. Listens effectively so that resultant actions show understanding of what was said. Coordinates so that all relevant individuals and functions are included in, and informed of, decisions and actions. (Weight range: 5 to 15).
Resource Management. Meets schedules and deadlines, and accomplishes work in order of priority; generates and accepts new ideas and methods for increasing work efficiency; effectively utilizes and properly controls available resources; supports organization's resource development and conservation goals. (Weight Range: 15 to 50).
Customer Relations. Demonstrates care for customers through respectful, courteous, reliable and conscientious actions. Seeks out and develops solid working relationships with customers to identify their needs, quantifies those needs, and develops practical solutions. Keeps customer informed and prevents surprises. Within the scope of job responsibility, seeks out and develops new programs and/or reimbursable customer work. (Weight Range: 10 to 50).
Management/Leadership. Actively furthers the mission of the organization. As appropriate, participates in the development and implementation of strategic and operational plans of the organization. Develops and implements tactical plans. Exercises leadership skills within the environment. Mentors junior personnel in career development, technical competence, and interpersonal skills. Exercises due responsibility to oversee technical/ acquisition/ organizational positions assigned to them. (Weight Range: 0 to 50).
Supervision/EEO. Works toward recruiting, developing, motivation, and retaining quality team members; takes timely/appropriate actions, applies EEO/merit principles; communicates mission and organizational goals; by example, creates a positive, safe, and challenging work environment; distributes work and empowers team members. (Weight Range: 15 to 50).

5-5. Mid-Year Review

A mid-year review between a supervisor and employee will be held to determine whether objectives are being met and whether performance objectives should be modified to reflect changes in planning, workload, and resource allocation. Additional reviews may be held as deemed necessary by the supervisor. The weights assigned to performance elements will be changed, if necessary. If the supervisor determines that an employee is not performing at an acceptable level on one or more elements, the supervisor must notify the employee and document the problem(s). This feedback will be provided at any time during the rating cycle. Verification that the mid-year review has taken place is documented by the rater and ratee by initials on the reverse side of the form at Appendix G, Attachment 1.

5-6. Performance Appraisals

A performance appraisal is scheduled for the final weeks of the annual performance cycle, although an individual performance appraisal may be conducted at any time after 60 days on approved objectives. The performance appraisal process brings supervisors and employees together for formal discussions on performance and results in (1) written appraisals, (2) performance ratings, (3) performance pay increases and/or bonuses, (4) cash awards, and (5) other individual performance-related actions, as appropriate. A performance appraisal will consist of two meetings held between employee and supervisor: the performance review meeting and the evaluation feedback meeting.
Employees will provide information to the supervisor for consideration prior to the performance review meeting. Supervisors will consider the employee's input and may also consider input from any other appropriate source.
Based on this information, the rater designates a rating for each performance element. Selection of the weighted points to assign to an employee's performance is assisted by use of the benchmark performance standards provided in Appendix I. See instructions in Appendix G. A performance appraisal with overall performance ratings assigned will be completed and recorded on the form at Appendix G, Attachment 2 after the performance review meeting.
The overall score is the sum of individual element scores. Employees will receive an academic-type rating of "A", "B", "C", or "F" depending upon the percentage of goal attainment. These summary ratings are representative of Pattern E in Summary Level Chart in 5 CFR 430.208(d)(1). This rating will become the rating of record, and
1. Employees rated "B" or higher will be eligible to receive performance-based pay increases and/or bonuses; and
2. Retention years credit for RIF will be received by employees rated "C" or higher.
3. Employees rated "F" will not receive the General Increase, retention years credit for RIF, or be eligible to receive performance-based pay increases and/or bonuses.
A rating of "A" will be assigned for cumulative scores of 85 to 100 points, "B" for cumulative scores of 70 through 84, "C" for cumulative scores of 50 through 69. An overall rating of "F" indicates failure to perform at the 50 percent level of any one of the assigned weighted elements. (In such a case, even though the cumulative score may exceed 49, the employee will nonetheless receive an overall rating of "F". NOTE: An "F" constitutes an unacceptable rating).

Summary Level

	1	2	3	4	5
OPM Pattern E*	X		X	X	X
MRDC Plan	F		C	B	A
Point Range	0-49 points or a score of less than 50% on any element		50-69 points	70-84 points	85-100 points

* 5 CFR 430.208(d) (1)

5-7. Performance Review Meeting between Employee and Supervisor

The purpose of the review meeting is to discuss job performance and accomplishments. Supervisors will not assign performance scores or performance ratings at this meeting. The supervisor notifies the employee of the review meeting in time to allow the employee to prepare a list of accomplishments. Employees will be given an opportunity at the meeting to give a personal performance assessment and describe accomplishments. The supervisor and employee will discuss job performance and accomplishments in relation to the performance elements, objectives, and planned activities.

5-8. Evaluation Feedback Meeting between Employee and Supervisor

In this meeting between employee and supervisor, the supervisor informs the employee of management's appraisal of the employee's performance, the employee's performance score and rating. During this second meeting, the supervisor and employee will discuss and document performance objectives for the next rating period.

5-9. Minimum Rating Period

The minimum rating period is 60 days. Employees cannot be rated until they perform under approved performance objectives and weighted performance elements for at least 60 days.

5-10. Annual Rating Periods

The rating period for the first year of the demonstration project extends from 7 June 1998 through 30 June 1999. All other rating periods extend over a 12-month period, beginning 1 July and ending 30 June of the subsequent year.
Interns are appraised in accordance with this plan. Mid-year in the rating cycle for each year of their internship, they will be given a special performance appraisal for the purpose of determining their eligibility for a pay raise/promotion in accordance with their Intern Plan.
Employees who move into a different position within the demonstration project with less than 60 days prior to the end of the rating period will be rated at the time of their move based upon their performance in the old position. Employees who leave their positions to accept other Federal positions after completing at least 60 days under approved objectives and performance elements will receive special appraisals to provide their gaining supervisors.
Newly hired employees with less than 60 days from the end of the rating period will not be rated that year but will receive the full amount of any General Increase and locality payment.
Raters who leave their position will prepare special ratings for all employees under their supervision who have been under approved objectives and performance elements for at least 60 days. The rater will prepare an annual rating when the employee has been covered by approved objectives for 60 days and 59 days or less remain in the current rating cycle.

5-11. Official Rating Chain

Each employee will have an identified rating chain consisting of at least a rater and a senior rater.

5-12. Employee Feedback on Supervisor's Performance

The demonstration project performance appraisal system allows optional use of peer evaluation input and/or input from subordinates whenever appropriate. The system will have the flexibility to be modified, if necessary, as more experience is gained under the project.

5-13. Special Requirements

Ratings for Temporary Promotions and Details. Temporary promotions and details for 60 days or more require performance objectives and weighted performance elements and normally are documented by special appraisals. Information provided in the special appraisal should be considered in preparing the annual appraisal.
1. The exception to preparing a special rating involves temporary promotions which are ongoing at the end of the employee's annual rating period. A temporarily promoted employee officially occupies the position to which promoted. Therefore, if the employee's scheduled annual rating period ends while on a temporary promotion which has lasted at least 60 days and the employee has performed under approved performance objectives and weighted performance elements for at least 60 days, the supervisor of the position to which the employee was temporarily promoted prepares the annual appraisal.
2. Conversely, an employee who is detailed continues to occupy the position from which detailed for official purposes. Thus, the supervisor of the detailed position prepares a special appraisal if the employee's annual rating period ends during the detail. The supervisor for the position from which the employee is detailed may either attach the special appraisal to the annual appraisal he/she prepares or, if the detail lasted for most of the rating period, adopt the special appraisal as the annual appraisal.
Long-Term Training. Long-term training (LTT) falls into two categories: classroom and developmental (on the job) training:
1. LTT Developmental Assignments should be treated as any other temporary assignment that continues for 120 days or more. Performance objectives and weighted performance elements are established and the employee receives a special or an annual rating upon completion.
2. LTT Classroom. If the training covers most or all of the rating period, two options exist:
  1. Render a rating for the classroom LTT. The supervisor and employee establish written performance objectives and weighted performance elements for the classroom LTT, based upon study objectives either developed locally or set forth by the education institution, the employee may be rated for the school period. Such ratings should be carefully rendered to meet current evaluation requirements, especially since the rating chain will have no opportunity to observe the individual's performance and must depend on information provided by the educational institution.
  2. Render a rating as soon as the employee returns to the position and completes 60 days under performance objectives and weighted performance elements. The employee receives an annual rating based on performance during the extended minimum rating period.
Reconsideration Process. Employees who are dissatisfied with their performance appraisals and cannot resolve the problem informally may request formal reconsideration. The formal request for reconsideration should be submitted in the form of a grievance, first to the rater, then to the senior rater, then to the Commander/ Director, and finally to the PMB, if necessary. Other existing grievance and appeal procedures may be used as necessary.
Performance Which Fails to Meet Expectations. The MRDC demo plan has a two-step process to deal with poor performers. This process may lead to involuntary separations if the employee is determined to be performing below the 50 percent level for one or more elements.
The process will begin with the recognition that an employee's performance is unacceptable (any element that would be rated less than the 50 percent level of its assigned benchmark weight). The two steps are as follows:
1. Performance Improvement Plan (PIP) - When the employee is determined to be performing below the 50 percent level for any element, the supervisor and employee will develop a structured PIP that will be monitored for a reasonable period of time. If the employee fails to improve during this structured plan, the activity may consider a change in assignment or reduction in pay as opposed to removal if the mission, organizational structure and available resources warrant such action. The employee will be given notice of proposed appropriate action.
  1. When a PIP ends prior to the end of the annual performance cycle and the employee's performance improves to the 50 percent or above level in all assigned level elements, the employee is appraised again at the end of the annual performance cycle.
  2. When, in conjunction with the completion of the PIP, the employee attains an annual rating of "C" or higher, they will receive the annual general increase and RIF retention years credit will be earned. In addition, employees attaining an annual rating of "B" or higher will also be eligible for an increase to base pay and/or bonus.
  3. When a PIP ends after the end of the annual performance cycle and the employee's performance has improved to the 50 percent or above level in all assigned elements, employment continues but no retroactive annual general increase, performance bonus, or RIF retention years credit is granted for that performance cycle period.
  4. Employees who receive an "F" rating who are on a performance improvement plan at the time pay determinations are made do not receive performance payouts or the general increase. This action may result in a base salary that is identified in a lower payband. This occurs because the minimum rates of basic pay in a payband increase as the result of general increase (5 U.S.C. 5303). This situation, (a reduction in band level with no reduction in pay) will not be considered an adverse action, nor will band retention provisions apply.
2. Separation - If employees are separated, they will have due process recourse as a former employee.
  1. A decision to remove an employee for unacceptable performance may be based only on those instances of unacceptable performance that occurred during the opportunity period, or within a one-year period, ending on the date of the notice of the proposed removal action. The notice of decision will specify the instances of unacceptable performance on which the action is based and will be given to the employee at or before the time the action will be effective.
  2. All relevant documentation concerning an action taken for unacceptable performance will be made available for review by the affected employee or designated representative. At a minimum, the documentation will consist of a copy of the notice of proposed action; the employee's written reply, if provided, or a summary if the employee makes an oral reply. Additionally, the record will contain the written notice of decision and the reasons thereof, along with any supporting material including documentation regarding the opportunity afforded the employee to demonstrate improved performance. An employee who sustains performance at a level at least equal to a level C rating for one year, will have all relevant documentation removed from the record.
Inability to Rate. When annual ratings cannot be prepared at the end of the scheduled rating period (e.g. extended LWOP, military leave), rating periods are extended for the time necessary to meet the minimum 60-day requirement, at which time the annual ratings are prepared. If a rating can not be accomplished by use of the 60 day extension, no rating will be given.

Section III - Compensation

5-14. General

Pay is composed of basic pay and locality pay. All covered employees will receive the full amount of locality pay adjustments when they occur regardless of performance. Additionally, all covered employees who have a rating of record of C or higher will receive a full General Increase. Basic pay is established within paybands to compensate employees for their performance. However, pay is linked to the GS pay scales and adjusted by the percentage specified when General Increases are authorized by Congress or the President.
A pay pool manager is accountable for staying within pay pool limits. The pay pool manager assigns performance pay increases and/or performance bonuses to individuals on the basis of a rating, the value of the performance pay pool resources available, and the individual's current basic rate of pay within a given payband. A pay pool manager may request approval from the Commander/Director to grant a performance pay increase to an employee that is higher than the compensation formula for that employee to recognize extraordinary achievement or to provide accelerated compensation for interns. Performance payouts will be calculated for each individual. Pay adjustments for the rating cycle will be effective not later than the end of the current fiscal year. The Commanders/Directors will reexamine the payout factor (see section 5-16) at the end of the first assessment period to determine if the planning rate was maintained by revised labor rates. If not, then the payout factor must be adjusted accordingly prior to the first year payments to stay within the allocated resources. This percentage, a payout factor, will be adjusted as necessary to compensate for changing employee demographics which impact the elements used in the GS system, such as the amount of within-grade increases, quality step increases, performance awards, and promotions. Performance payouts will be calculated so that a pay pool manager will not exceed the resources that are available in the pay pool.
The performance pay pool is composed of money previously available for within-grade increases, quality step increases, performance awards, and promotions between grades that are banded under the demonstration project. The payouts made to employees from the performance pay pool will be a mix of base pay increases and/or bonus payments. Some portion of the activity's budget will be reserved for special ad hoc awards (e.g., suggestion awards, on-the-spot awards or special act awards) and will not be included as part of the performance pay pool.
The Commander/Director will allocate funds for the pay pools. The basic rate of pay used in computing the pay pool and performance payouts excludes locality pay.
No performance pay increases will be granted to employees at the top step of their payband. In this case, payouts earned as a result of performance will be paid as a performance bonus. Also, for employees receiving retained rates above the applicable payband maximum, the entire performance payout will be in the form of a bonus payment. Performance bonuses are cash payments and are not part of the basic pay for any purposes (e.g., lump sum payments of annual leave upon separation, life insurance, and retirement).
Pay increases for employees receiving retained rates will be determined in accordance with 5 U.S.C. 5363, except that those with an F rating will receive no pay increase.
Payments for Accrued Step Increase. Employees converting from the existing GS pay system to the pay-for-performance system will be awarded that portion of the next higher step based upon the portion of the waiting period they had completed prior to the date of conversion. Compensation will be in the form of a lump sum payment (not added to the base salary) and will be paid upon conversion but no earlier than one year after implementation of the project. Employees at Step 10, or receiving retained rates, on the date of implementation will not be eligible for the lump sum payment.

5-15. Performance Pay Increases and/or Performance Bonuses.

Performance pay increases or performance bonuses are granted based on the employee's performance rating. The overall score is the sum of individual performance element scores. Employees will receive a rating of A, B, C, or F depending upon the score attained. This rating will become the rating of record, and only those employees rated B or higher will receive performance pay increases (i.e., basic pay increases, and/or performance bonuses). A rating of A will be assigned for scores from 85 to 100 points, B for scores from 70 to 84, C for scores from 50 to 69. An overall rating of "F" indicates a failure to perform at the 50 percent level of any one of the assigned weighted elements. (In such a case, even though the cumulative score may exceed 49, the employee will nonetheless receive an overall rating of "F". NOTE: An "F" constitutes an unacceptable rating.) The academic-type ratings will be used to determine performance payouts and to award additional RIF retention years as follows:

RATING	COMPENSATION	RIF RETENTION YEARS	GENERAL INCREASE **	LOCALITY
A	2 shares	10	Yes	Yes
B	1 share	07	Yes	Yes
C	0 shares	03*	Yes	Yes
F	0 shares	00	No	Yes

* Note that employees rated "B" or higher will be eligible to receive performance-based pay increases and/or bonuses. Retention years credit for RIF will be received by employees rated "C" or better prior to the end of the rating cycle.

* * Note that the maximum pay rate for payband V cannot exceed rate for ES-4. Therefore, employees at or near the top payband V may not receive the full General Increase if it is not authorized for SES employees.

A share will be calculated so that a pay pool manager will not exceed the resources that are available in the pay pool. An employee's performance payout is computed as follows:

	Pool Value x SAL x N
Performance Payout =	SUM (SAL_j X N_j)
	_{j=1 to n}

Where:

Pool Value = F x SUM (SAL_k); k=1 to n

n = Number of employees in pay pool

N = Number of shares earned by an employee based on the performance rating (0 to 2)

SAL = An individual's basic rate of pay

SUM = The summation of the entities in parentheses over the range indicated

F = Payout Factor

Once the individual performance payout amounts have been determined, the next step is to determine what portion of each payout will be in the form of a base pay increase as opposed to a bonus payment. An annual performance base pay increase could be all, none, or part of the compensation formula depending on the current basic rate of pay of the employee. Annual performance base pay increases will be limited to the difference between the particular band pay cap and the employee's current basic rate of pay, or total dollar value of shares, whichever is less, with the balance converted to a performance bonus. This means that employees whose basic rates of pay have reached the upper limits of a particular payband will receive most performance compensation as a performance bonus. Cash bonuses will not become a part of the employee's basic rate of pay. Employees receiving retained rates are subject to special rules governing basic pay adjustments. An employee receiving a retained rate whose performance rating is "F" at the time of a general pay increase will receive no increase in the retained rate. All other employees receiving a retained rate will receive a general pay increase equal to 50 percent of the amount of the increase in the maximum rate of basic pay payable for the payband of the employee's position.

5-16. Awards.

Awards, while not linked to the pay-for-performance system, will continue to be given for special acts and other categories as they occur. Awards may include, but are not limited to, special acts or service awards, patents, inventions, suggestions, on-the-spots, and time-off, and may be modified or expanded as appropriate. Major Army Command (MACOM) and DoD awards and other honorary awards will be retained.
In an effort to foster and encourage teamwork among employees, a Commander/Director may allocate a sum of money to a team for outstanding completion of a special task or significant achievement, and the team may decide the individual distribution of the total dollars among themselves.
Unless covered by negotiated grievance procedures, employees may not grieve or appeal the decision to grant or the amount of an award.

5-17. Impact of Promotions on Performance Increases/Bonuses.

Permanent Promotions. Employees who receive a permanent promotion after determination of their performance pay increase and/or performance bonus, but before their actual payout, are subject to the following adjustments:
1. If the effective date of the promotion is after the performance pay increase and/or performance bonus payout, the promotion pay increase will be applied to the employee's pay as adjusted by the performance pay increase payout; additionally, any performance bonus will be paid to the employee.
2. If the effective date of the promotion precedes the performance pay increase and/or performance bonus payout, and
  1. The employee is due a performance pay increase, the employee's basic pay will be adjusted appropriately to incorporate the performance pay increase.
  2. The employee is due a performance bonus, with or without a performance pay increase, the bonus will be paid out irrespective of the promotion.
Competitive Temporary Promotions. Employees who receive a competitive temporary promotion after determination of their performance pay increase and/or performance bonus, but before their actual payout, are subject to the following adjustments:
1. If the effective date of the promotion is after the performance pay increase and/or performance bonus payout, the promotion pay increase will be applied to the employee's pay as adjusted by the performance pay increase payout; additionally, any performance bonus paid out will be retained by the employee.
2. If the effective date of the promotion precedes the performance pay increase and/or performance bonus payout, and
  1. The employee is due a performance pay increase, the employee's basic pay will be adjusted appropriately to incorporate the performance pay increase and then the temporary promotion will be adjusted to reflect the impact of the performance pay increase.
  2. The employee is due a performance bonus, with or without a performance pay increase, the employee's basic pay will be adjusted appropriately to incorporate the performance pay increase and then the temporary promotion will be adjusted. Performance bonus entitlements will be given to the employee as a lump sum payment after all other pay adjustments are made.
3. Non-Competitive Temporary Promotions. Employees who receive a non-competitive temporary promotion after determination of their performance pay increase and/or performance bonus, but before their actual payout, are subject to the following adjustments:
  1. If the effective date of the promotion is after the performance pay increase and/or performance bonus payout, the promotion pay increase will be applied to the employee's pay as adjusted by the performance pay increase payout; additionally, any performance bonus paid out will be retained by the employee.
    1. If the effective date of the promotion precedes the performance pay increase and/or bonus payout, the employee will receive the temporary promotion pay increase and the performance pay increase will be delayed until termination of the temporary position. Upon termination of the temporary promotion, the employee's pay will be readjusted to where it was prior to the temporary promotion and then adjusted to reflect the performance pay increase awarded for the prior year's performance.
    2. In either case, the employee will be paid the performance bonus.

5-18. Supervisory Bonus

Supervisory bonuses of up to 10 percent of the basic rate of pay may be paid at the discretion of Commanders/Directors to supervisors with employees in the same pay band. In exceptional cases (approved by Commander, MRDC), supervisors who do not have employees in the same pay band may be compensated up to 5 percent of basic rate of pay. Employees who qualify for the bonus include supervisors in all occupational families with formal supervisory authority meeting that required for coverage under the OPM GS Supervisory Guide. The supervisory bonus is to recognize supervisory responsibilities required of supervisors most often receiving the same pay as non-supervisory subordinates. Supervisory bonuses will not be treated as basic pay and are not a part of the performance pay pool. There are two situations in which a supervisory bonus may be warranted:
1. Supervisors may be granted up to 10 percent of the basic rate of pay if they supervise employees within the same pay band or,
2. up to 5 percent of the basic rate of pay for those supervising employees in lower or other pay bands.
The bonus will be paid at the beginning of the appraisal period, if the individual leaves a supervisory position or is removed from supervisory responsibilities (unless effected through RIF action), the prorated portion of the bonus for the non-supervisory portion of the performance year will be recovered as a debt due the Government. The supervisor, prior to receiving any supervisory bonus, will sign an agreement to make any required repayment should the need arise.

5-19. Pay and Compensation Ceilings.

An employee's total monetary compensation paid in a calendar year may not exceed the basic rate of pay paid in level I of the Executive Schedule consistent with 5 U.S.C. 5307 and 5 CFR part 530, subpart B. In addition, each payband will have its own pay ceiling, just as grades do in the current system. Pay rates for the various paybands will be directly keyed to the GS rates. Except for retained rates, basic pay will be limited to the maximum rates payable for each payband.
Pay and compensation policies for positions in payband V of the Engineers and Scientists (E&S) occupational family will be developed in accordance with criteria to be established jointly by the Assistant Secretary of the Army (Manpower and Reserve Affairs) and the Assistant Secretary of the Army (Research, Development and Acquisition). The proposed salary range is a minimum of 120% of the minimum rate of basic pay for GS-15 with a maximum rate of basic pay established at the rate of basic pay (excluding locality pay) for SES level 4 (ES-4).
Movement of employees through payband IV of the Administrative and Payband III of the Engineers and Scientists occupational families will be in line with overall cost neutrality of the demonstration and generally unrestricted based on performance until the person reaches the salary of GS-13 Step 10. At that point, high grade controls restrict further movement, i.e., demonstration project employees will not be able to advance in payband DB-III or DJ-IV beyond the salary equivalent of GS-13, step 10 unless a high-grade authorization is available. To accommodate this, employees whose salary adjustment would place them above the GS-13 Step 10 level in organizations where high-grade authorizations are unavailable will receive permanent adjustments to basic salary up to an amount equivalent to a GS-13 Step 10. Any additional amount granted will be paid similarly to employees reaching the top of the band, i.e., an employee may be paid a performance bonus.