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Pay & Leave Pay Administration

Fact Sheet: Grade Retention

Description

An employee under a covered pay system who is placed in a lower-graded position under the same or different covered pay system (e.g., as a result of a reduction in force or when his or her position is reduced in grade as a result of a reclassification) is entitled to retain the grade held immediately before the reduction for a period of 2 years. (See definition of covered pay system under Key Terms.)

Exclusions

An agency may not provide grade retention to an employee who-

  • Is reduced in grade for personal cause or at the employee's request;
  • Was employed on a temporary or term basis immediately before the action causing the reduction in grade; or
  • Moves between positions not under a covered pay system, from a position under a covered pay system to a position not under a covered pay system, or from a position not under a covered pay system to a position under a covered pay system.

See 5 CFR 536.102(b) for additional exclusions.

Mandatory Grade Retention

An agency must provide grade retention to an employee who moves from a position under a covered pay system to a lower-graded position under a covered pay system as a result of-

  • Reduction in force procedures (as described in 5 CFR 536.201(c)); or
  • A reclassification process (as described in 5 CFR 536.201(d)).

An employee is eligible for grade retention as a result of a reduction in force only if the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than the grade of the position in which the employee is placed. An employee is eligible for grade retention based on a reclassification of his or her position only if, immediately before the reduction in grade, that position was classified at the existing grade or a higher grade for a continuous period of at least 1 year. (See 5 CFR 536.203.)

Optional Grade Retention

An agency may provide grade retention to an employee moving from a position under a covered pay system to a lower-graded position under a covered pay system when-

  • Management announces a reorganization or reclassification decision in writing that may or would affect the employee; and
  • The employee moves to a lower-graded position (either at the employee's initiative or in response to a management offer) on or before the date the announced reorganization or reclassification is effected.

An employee is eligible for optional grade retention only if, immediately before being placed in the lower grade, the employee has served for at least 52 consecutive weeks in one or more positions under a covered pay system at one or more grades higher than that lower grade. (See 5 CFR 536.202 and 536.203(c).)

Period of Grade Retention

An employee is entitled to retain the grade held immediately before the action that provides entitlement to grade retention for 2 years beginning on the date the employee is placed in the lower-graded position, unless grade retention is terminated. See 5 CFR 536.204 for additional rules regarding the period of grade retention.

Applicability of Retained Grade

An agency must treat an employee's retained grade as the employee's grade for almost all purposes, including pay and pay administration and premium pay. If the employee's actual position of record is under a different covered pay system than the covered pay system associated with the retained grade, the agency also must treat the employee as being under the covered pay system associated with the retained grade for the same purposes. For example, if an employee in a General Schedule (GS) position is placed in a lower-graded Federal Wage System position as a result of a reduction in force and retains the grade of the GS position, the agency must treat the employee as a GS employee for almost all purposes. (See 5 CFR 536.205(b) for exceptions.)

Determining an Employee's Rate of Basic Pay

When an employee becomes entitled to grade retention or becomes covered by different pay schedules (because of a change in the employee's position of record, official worksite, or the establishment of a new pay schedule) during a period of grade retention, the agency must determine the employee's rate of basic pay as follows (see 5 CFR 536.206):

Preexisting rate within a range

If an employee is entitled to a rate of basic pay within the applicable rate range before the action entitling the employee to grade retention, the employee is entitled to the rate of basic pay in the rate range that applies to the employee's position of record and retained grade after the action that corresponds to the employee's grade and step (or relative position in range for a GM employee) immediately before the action. If the employee's rate of basic pay otherwise would be reduced because of placement under a lower-paying pay schedule (excluding any reduction that results from a geographic conversion), the employee is eligible for pay retention under 5 CFR part 536, subpart C.

Preexisting retained or saved rate

If an employee is entitled to a retained rate or a saved rate immediately before the action resulting in the application of grade retention, an agency must determine the employee's payable rate of basic pay under 5 CFR 536.303 and 536.304 (for a retained rate) or 5 CFR 359.705 (for a saved rate).

Adjusting an Employee's Rate While Entitled to Grade Retention

When an employee's existing pay schedule is adjusted or a new pay schedule that covers the employee's existing position of record (for the retained grade) is established (e.g., establishment of a new special rate schedule) while the employee is entitled to grade retention, the employee receives the same pay adjustments as any employee at the same grade and step. An employee who is receiving a retained rate while entitled to grade retention is entitled to 50 percent of the increase in the maximum rate of the highest applicable rate range for the employee's position and retained grade.

Loss of Eligibility for or Termination of Grade Retention

Eligibility for grade retention ceases or grade retention terminates if any of the following conditions occurs:

  • The employee has a break in service of 1 workday or more;
  • The employee is reduced in grade for personal cause or at the employee's request (based on the grade of the employee's position of record rather than the employee's retained grade);
  • The employee moves to a position under a covered pay system with a grade that is equal to or higher than the retained grade (excluding temporary promotions);
  • The employee declines a reasonable offer of a position with a grade equal to or higher than the retained grade;
  • The employee elects in writing to terminate the benefits of grade retention; or
  • The employee moves to a position not under a covered pay system.

See 5 CFR 536.207 and 536.208 for additional rules regarding loss of eligibility or termination of grade retention.

Reasonable Offer Appeals

An employee whose grade retention benefits are terminated based on a declination of a reasonable offer of a position the grade of which is equal to or higher than his or her retained grade may appeal the termination to the Office of Personal Management. See 5 CFR part 536, subpart D, for additional information.

Comparing Grades under Different Pay Systems

When comparing grades under different pay systems, an agency must compare the comparison rates (as defined in 5 CFR 536.103) of the applicable grades to determine whether the grade of a position is equal to, higher than, or lower than the grade of another position. An agency must make such comparisons when determining eligibility for grade retention, whether grade retention eligibility is lost, or whether grade retention is terminated when an employee is moving to or declining a reasonable offer of a position under a different pay system. See 5 CFR 536.105 for additional information.

Key Terms (See also 5 CFR 536.103.)

Covered pay system means the General Schedule pay system under 5 U.S.C. chapter 53, subchapter III; a prevailing rate system under 5 U.S.C. chapter 53, subchapter IV (including the Federal Wage System); or a special occupational pay system under 5 U.S.C. chapter 53, subchapter IX.

Management action means an action (not for personal cause) by an agency official not initiated or requested by an employee which may adversely affect the employee's grade or rate of basic pay.

Position of record means an employee's official position (defined by grade, occupational series, employing agency, law enforcement officer (LEO) status, and any other condition that determines coverage under a pay schedule (other than official worksite)), as documented on the employee's most recent Notification of Personnel Action (Standard Form 50 or equivalent) and current position description. A position to which an employee is temporarily detailed is not documented as a position of record. For an employee whose change in official position is followed within 3 workdays by a reduction in force resulting in the employee's separation before he or she is required to report to duty in the new position, the position of record in effect immediately before the position change is deemed to remain the position of record through the date of separation.

Rate of basic pay means the rate of pay fixed by law or administrative action for the position held by an employee before any deductions, including a GS rate under 5 U.S.C. 5332; a LEO special base rate under section 403 of the Federal Employees Pay Comparability Act of 1990; a special rate under 5 CFR part 530, subpart C, or similar payment under other legal authority; a locality rate under 5 CFR part 531, subpart F, or similar payment under other legal authority; a prevailing rate under 5 U.S.C. 5343; or a retained rate under 5 CFR part 536, subpart C, excluding additional pay of any other kind.

Reasonable offer means an offer of a position that meets the requirements in 5 CFR 536.104. For example, an offer of a position is a reasonable offer if the position's grade is equal to or higher than the retained grade, if the offer is in writing and includes an official position description, and if the offer meets certain other conditions.

Reduced in grade or pay at the employee's request means a reduction in grade or rate of basic pay that is initiated by the employee for his or her benefit, convenience, or personal advantage. A reduction in grade or pay that is caused or influenced by a management action is not considered to be at an employee's request, except that the voluntary reduction in grade or pay of an employee in response to a management action directly related to personal cause is considered to be at the employee's request.

Reduced in grade or pay for personal cause means a reduction in grade or rate of basic pay based on the conduct, character, or unacceptable performance of an employee. In situation in which an employee is reduced in grade or pay for inability to perform the duties of his or her position because of a medical or physical condition beyond the employee's control, the reduction in grade or pay is not considered to be for personal cause.

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