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Washington, D.C. -- The U.S. Office of Personnel Management and the Office of Management and Budget have jointly issued important rules linking the pay of senior executives and senior professionals to their performance in government offices across America. These rules are based on a provision in the Human Capital Officers Act of 2002, which is part of the Homeland Security Act of 2002. OPM also has issued regulations that establish the rules for the new pay-for-performance system for senior executives, as established by the National Defense Authorization Act for Fiscal Year 2004. On July 26, 2004, OPM Director Kay Coles James issued a memorandum (attached) to heads of executive departments and agencies in which she provided guidance on submitting certification requests for the performance appraisal systems of their senior employees.
The Senior Executive Service (SES) rule changes represent the culmination of a long-term focus on improving the performance of the government through its senior executives. For the past three years, consistent with the President and his Administration's focus on achieving results, Director James has directed federal agencies to make meaningful distinctions in the performance ratings of their senior executives.
· In November 2001, Director James issued a memorandum to heads of federal agencies that highlighted her concern about the distribution of senior executive performance ratings, noting that agencies had rated nearly 85 percent of their senior executives at the highest level their systems would permit. James encouraged heads of agencies to use their SES performance appraisal system(s) to promote a government that is results-oriented, citizen-centered, and market-based.
· In September 2002, Director James followed up with a memorandum to heads of agencies indicating that OPM had begun to see some shift toward results-based appraisals for SES members and further urging agency heads to ensure that measurable results form the basis for senior executives' performance appraisals.
· In February 2004, Director James encouraged agency heads to ensure that their SES performance ratings are based on measurable results, not anecdotes or activities, and that the ratings are consistent with each agency's Government Performance and Results Act program performance measures, the results of the President's Management Agenda scorecard, and other demonstrable performance metrics and indicators.
"The new SES rules are the outgrowth of three years of marked progress under the President's Management Agenda and illustrate a firm commitment to focus on performance and achieve results. Pay levels and pay adjustments for thousands of executives will now be determined by the evaluations earned under appraisal systems that make meaningful distinctions based on relative performance," said James. "Recognizing performance is a key component of the federal government's efforts to retain and reward outstanding employees, particularly those who manage critically important programs. Senior executives who demonstrate the highest levels of performance and make the greatest contributions to the defense, security and general welfare of our Nation will be rewarded with increased compensation."
The interim final regulations on executive performance and accountability prescribe the specific criteria agencies must meet to receive certification of performance appraisal systems for their SES, and senior-level and scientific or professional (AKA, senior professional) positions. Certification will ensure that appraisal systems make meaningful distinctions based on relative performance for senior executives and senior professionals. The new certification regulations accomplish this goal by establishing criteria relating to the following nine areas:
o alignment o consultation o assessments and guidelines
o balance o oversight o performance differentiation
o accountability o results o pay differentiation
A second set of regulations issued by OPM -- the proposed regulations on SES pay and performance awards -- prescribes the rules for setting and adjusting basic pay for senior executives and for applying the higher aggregate limitation on pay for senior executives and senior professionals. When issued later this year, the final regulations will allow an agency possessing an OPM/OMB-certified performance appraisal system to set basic pay up to level II of the Executive Schedule (currently $158,100) for their best-performing senior executives. In addition, the final rules will allow agencies with certified systems to apply a higher aggregate limitation on pay in a calendar year, up to the rate of pay for the Vice President (currently $203,000), for senior executives and senior professionals.
Last January, OPM issued interim regulations to establish the new performance-based SES pay system and prescribe the rules for conversion to the new SES open-range pay band. Currently, the minimum salary of the SES pay range is $104,927; the maximum salary is $145,600. Senior executives no longer receive automatic, annual pay adjustments; adjustments to pay now are based on the executive's individual performance and/or contribution to the employing agency's performance.
Those interim rules guarantee that a senior executive's base pay cannot be reduced until January 11, 2005.
James added: "I'd like to thank the many stakeholders we worked with, as they are an important part of the process. We look forward to continued discussions with all interested stakeholders as we implement contemporary human resources programs and compensation models. Our goal is to ensure that the federal government will continue to be known as an employer that provides challenging opportunities and compensates people whose performance and results command higher pay."
On Wednesday, July 28, OPM hosted a forum to provide federal Chief Human Capital Officers and their technical staffs with an overview of the new SES certification and pay administration regulations.
Our mission is to Recruit, Retain and Honor a World-Class Workforce to Serve the American People. OPM supports U.S. agencies with personnel services and policy leadership including staffing tools, guidance on labor-management relations and programs to improve work force performance.