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Frequently Asked Questions Pay & Leave

Grade and Pay Retention

  •  If an employee is reduced in grade or pay in conjunction with a transfer to another agency, there is no mandatory entitlement to grade or pay retention. However, the gaining agency may grant grade or pay retention under its optional authority (5 CFR 536.202 or 536.302), as long as the employee is otherwise qualified.One of the eligibility conditions is that the reduction in grade or pay not be "at the employee's request" (5 CFR 536.102(b)(1)). If the transfer is initiated by the employee for his or her benefit, convenience, or personal advantage (including a transfer to avoid adverse action based on personal cause), it would be considered to be at the employee's request, thus barring grade or pay retention. However, if the transfer was directly caused or influenced by a management action (not based on personal cause), then even though the transfer appeared to be voluntary, it would not be "at the employee's request." (See definitions ofmanagement action and reduced in grade or pay at the employee's request in 5 CFR 536.103.)For purposes of providing optional grade retention to a transferring employee, the management action must be either a specific RIF notice or a written announcement of a reorganization or reclassification that might result in reduction of the employee's grade. For purposes of optional pay retention, the management action must be an action that would result in a pay reduction (after the application of any applicable geographic conversion under 5 CFR 536.303(a) and in the absence of pay retention).Note: A movement between subcomponents of an Executive department or other Executive agency cannot be considered a transfer. Under the law, the term "agency" includes Executive departments and certain other agencies. (See 5 U.S.C. 101-105, 5102(a), and 5361(2).) Thus, it is possible for mandatory grade and pay retention to apply to an employee who moves between subcomponents of an Executive department or other Executive agency--e.g., if the employee is placed in a lower-graded position at management initiative as a result of reduction-in-force procedures.
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  • If an employee is already under grade or pay retention prior to transferring to another agency, the gaining agency must continue the employee's grade or pay retention entitlement, absent the occurrence of one of the terminating events set forth in law and regulation, such as a break in service of 1 workday or more or reduction in grade at the employee's request. (See 5 U.S.C. 5362(d) and 5 CFR 536.208 regarding termination of grade retention and 5 U.S.C. 5363(c) and 5 CFR 536.308 regarding termination of pay retention. See also question 3, below.)
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  • Employees holding VRAs are not eligible for grade or pay retention upon reduction in grade or pay, or to severance pay upon involuntary separation (not for cause).By law, grade and pay retention apply only to employees whose employment is on other than a temporary or term basis. (See the definition of employee in 5 U.S.C. 5361(1).) The grade and pay retention regulations define employed on a temporary or term basis as employment under an appointment having a definite time limitation or designated as temporary or term. (See 5 CFR 536.103.)Similarly, the severance pay law does not apply to an employee serving under an appointment with a definite time limitation, unless the time-limited appointment is made effective within 3 calendar days after separation from a qualifying appointment without time limitation. (See the definition of employee in 5 U.S.C. 5595(a)(2)(ii) and the definition of non-qualifying appointment in 5 CFR 550.703.)Under 5 CFR part 307, a VRA is limited to 2 years. Although employees are entitled to convert to a career or career-conditional appointment upon completion of the 2 years, this conversion right is contingent upon meeting the terms of the VRA--i.e., employees must satisfactorily complete (1) 2 years of substantially continuous service and (2) any education and training required under the VRA program. If employees do not complete these requirements, they are not converted to career or a career-conditional appointment, and their VRA ends. Therefore, for the purposes of grade and pay retention and severance pay, the VRA must be viewed as having a definite 2-year limitation. Because the VRA is time-limited, employees holding such appointments are not eligible for grade and pay retention or severance pay.
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  • Under the law, an employee does not necessarily have to have 52 consecutive weeks at the grade held immediately before being downgraded in order to retain that grade under the grade retention provisions. Under 5 U.S.C. 5362(a), any employee who is placed as a result of reduction-in-force (RIF) procedures into a lower grade and who has served for 52 consecutive weeks or more in "one or more positions . . . at a grade or grades higher than that of the new position, is entitled to have the grade of the position held immediately before such placement" as the retained grade. [Emphasis added.] See also 5 CFR 536.203(a) and (c).Thus, for example, assume an employee has 2 years of service at GS-12 and 10 weeks of service at GS-13 immediately prior to being downgraded to GS-11 as a result of RIF procedures. Even though he or she has only 10 weeks of service at the GS-13 level, the GS-12 service plus the GS-13 service gives the employee more than 52 consecutive weeks at one or more grades higher than that of the position to which the employee is being reduced (i.e., GS-11). Thus, the employee meets the 52 consecutive week requirement and is entitled to retain the grade of GS-13.In contrast, if this employee were being reduced to a GS-12 position rather than a GS-11 position, the employee would not meet the 52 consecutive week requirement and could not retain the GS-13.
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  • An employee is not eligible for grade retention if the employee was serving under a term or temporary appointment in the position from which he or she was downgraded. See 5 CFR 536.102(b)(2) and definition of employee in 5 U.S.C. 5361. However, the fact that the employee accepts a temporary or term appointment in conjunction with being downgraded does not affect the employee's entitlement to grade retention. Similarly, if an employee who is already under grade retention receives a temporary or term appointment via reassignment or transfer, the employee would remain entitled to grade retention, unless one of the terminating events specified in law and regulation occur. (See 5 U.S.C. 5362(d) and 5 CFR 536.208. See also question 2, below.)
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  • Since a reduction in grade at the employee's request is a terminating event, a determination as to whether such a reduction occurred must be made at the time an employee under grade or pay retention is transferred. This determination must be made based on the actual grade of the employee's position rather than the employee's retained grade. For example, if the true grade of the employee's position is GS-12 and his or her retained grade is GS-13, then acceptance of a GS-12 position upon transfer to another agency is not considered a reduction in grade at the employee's request.In addition, the term reduced in grade or pay at the employee's request is defined in 5 CFR 536.103 to exclude any reduction in grade that is directly "caused or influenced by a management action." Thus, while a reduction in grade resulting from transfer to another agency may appear to be a voluntary movement, if that transfer was directly caused or influenced by a management action at the losing agency, the gaining agency must continue the employee's grade or pay retention.
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