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Performance Management Performance Management Cycle

Quality Step Increases: Know The Costs

Managers and supervisors should consider carefully the long-term cost implications of granting quality step increases (QSIs) to their employees. In reviewing various agency award programs, our Office of Merit Systems Oversight observed that this is not always the case, and that managers and supervisors are also unsure of how their agencies budget for QSI costs.

What is a QSI?

A quality step increase is a faster than normal within-grade increase used to reward General Schedule employees at all grade levels who display high quality performance. To be eligible for a QSI, employees must:

  • currently be paid below step 10 of their grade level;
  • have received an Outstanding or equivalent rating of record, or have received the highest rating available under their performance management program and have demonstrated sustained performance of high quality; and
  • not have received a QSI within the preceding 52 consecutive calendar weeks.

What are the Costs?

A QSI increases an employee's rate of basic pay, it represents an increased cost to an agency on an ongoing basis, unlike a lump-sum cash award. Managers also should know that QSIs increase retirement and Thrift Savings Plan expenses as well. Managers should estimate the costs so they can better judge whether the award is appropriate to the circumstances. By using information such as the employee's grade and step level and how long the awarded employee is expected to remain in the Government, managers can project award costs over given time periods. For example, the 1-year salary cost of granting a QSI at the beginning of the fiscal year to a GS-9, step 2 employee in Washington, DC would be $1,177, but the compounded salary cost over 5 years would be $3,674, assuming a 3 percent per year general increase based on the Employment Cost Index.

A QSI is an important pay-for-performance feature and a valuable tool for managers to use to recognize and reward outstanding performance. As with all awards, however, managers must recognize the cost implications so that they can appropriately match the award to the performance and best use agency resources.

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