Recruitment, Relocation and Retention Incentives

Agencies may make special incentive payments for purposes of recruiting or retaining employees or in order to keep an employee subject to relocation. These recruitment, relocation and retention payments, commonly known as the “3Rs,” were revised by the Federal Workforce Flexibilities Act of 2004 (PL 108-411) in order to standardize certain policies applying to the payments, create new options for paying retention incentives, and increase the amounts payable in all three categories in certain situations.

Note: Budgetary restrictions may limit their availability in an agency. Also, P.L. 115-41 allows the Veterans Affairs Department to require employees to pay back relocation incentives on a later finding of misconduct by the employee that influenced the payment of the incentive.

3R Incentives

The incentives may be paid to an eligible individual for a general schedule (GS), senior level (SL), senior scientific or technical (ST), Senior Executive Service (SES), Federal Bureau of Investigation and Drug Enforcement Administration (FBI/DEA) SES, Executive Schedule, law enforcement officer, or prevailing rate position. The Office of Personnel Management may approve other categories for coverage upon written request from the head of the employing agency.

A list of approved categories under this authority is at www.opm.gov/policy-data-oversight/pay-leave/recruitment-relocation-retention-incentives.

The incentives may not be paid to Presidential appointees; noncareer appointees in the Senior Executive Service; those in positions excepted from the competitive service by reason of their confidential, policy-determining, policy-making, or policy-advocating natures; agency heads; or those expected to receive an appointment as an agency head.

Before paying the incentives, an agency must establish a plan with certain features as described in 5 CFR 575, including the required documentation, requirements regarding service agreements and other information.

For each incentive authorized, the agency must document in writing the basis for the payment. Agencies also must certify that the payments are necessary to support their mission and program needs, and must track trends in actual usage and identify and correct any anomalies.

OPM also monitors use of the incentives and may require agencies to take actions including suspending the authority of an agency component to make such payments pending higher-level internal review of the component’s use of the authority. OPM also may suspend the authority of an entire agency to make such payments pending further OPM review.

Recruitment, Relocation and Retention Agreement

Before receiving one of these incentives, an employee must sign a written agreement to complete a specified period of employment with the agency. The service agreement must specify the length, commencement, and termination dates of the service period; the amount of the incentive; the method and timing of incentive payments; the conditions under which an agreement will be terminated by the agency; any agency or employee obligations if a service agreement is terminated (including the conditions under which the employee must repay an incentive or under which the agency must make additional payments for partially completed service); and any other terms and conditions for receiving and retaining a recruitment incentive.

The employee’s required service period may not be less than six months and may not exceed four years.

An agency may unilaterally terminate an incentive payment service agreement based solely on the management needs of the agency, in which case the employee is entitled to recruitment incentive payments attributable to completed service and to retain any incentive payments already received that are attributable to uncompleted service. An agency must terminate a service agreement if an employee is demoted or separated for cause (i.e., for unacceptable performance or conduct), receives a rating of record lower than “fully successful” or equivalent during the service period, or otherwise fails to fulfill the terms of the service agreement. In such cases, the employee may retain any recruitment incentive payments attributable to completed service, but must repay any portion of the incentive attributable to uncompleted service. The agency is not obligated to pay the employee any outstanding incentive payment attributable to completed service unless such payment was required under the terms of the recruitment incentive service agreement.

An agency must notify an employee in writing when it terminates an incentive service agreement. The termination of a service agreement is not grievable or appealable.

For the purpose of calculating an incentive, the employee’s rate of basic pay includes a special rate under 5 CFR 530, subpart C, a locality payment under 5 CFR 531, subpart F, or similar payment under other legal authority, but excludes additional pay of any other kind. An incentive is not part of an employee’s rate of basic pay for any purpose.

Payment of an incentive is subject to the aggregate limitation on pay under 5 CFR 530, subpart B.

Recruitment Incentives

An agency may pay a recruitment incentive to a newly appointed employee if the agency has determined that the position is likely to be difficult to fill in the absence of an incentive. “Newly appointed” refers to the first appointment (regardless of tenure) as an employee, an appointment following a break in service of at least 90 days from a previous appointment, or, in certain cases, an appointment following a break in service of less than 90 days.

An agency may determine that a position is likely to be difficult to fill if the agency is likely to have difficulty recruiting candidates with the competencies (i.e., knowledge, skills, abilities, behaviors, and other characteristics) required for the position (or group of positions) in the absence of a recruitment incentive based on a consideration of the factors listed in 5 CFR 575.106(b). An agency also may determine that a position is likely to be difficult to fill if OPM has approved the use of a direct-hire authority applicable to the position.

An agency may target groups of similar positions that have been difficult to fill in the past or that are likely to be difficult to fill in the future and may make the required determination to offer a recruitment incentive on a group basis.

Agencies must monitor their use of recruitment incentives to make sure that they comply with laws and rules and still are warranted.

Recruitment Incentive Payment

A recruitment incentive may not exceed 25 percent of the employee’s annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be increased to 50 percent (based on a critical agency need), not to exceed 100 percent of the employee’s annual rate of basic pay at the beginning of the service period; this applies to both individual and group incentives. (See 5 CFR 575.109(c).) The incentive may be paid as an initial lump-sum payment at the beginning of the service period, in installments throughout the service period, as a final-lump sum payment upon completion of the service period, or in a combination of these methods. An incentive may be paid to an individual not yet employed who has received a written offer of employment and signed a written service agreement.

Relocation Incentives

Relocation incentives may be paid to an employee of the federal government who must relocate to a different geographic area without a break in service to accept a position in an agency or to an employee of an agency who must relocate to a different geographic area (permanently or temporarily) to accept a position that the agency determines would be difficult to fill.

A position is considered to be in a different geographic area if the worksite of the new position is 50 or more miles from the worksite of the position held immediately before the move. If the worksite of the new position is less than 50 miles from the worksite of the position held immediately before the move, but the employee must relocate (i.e., establish a new residence) to accept the position, an authorized agency official may waive the 50-mile requirement and pay the employee a relocation incentive. In all cases, an employee must establish a residence in the new geographic area before the agency may pay the employee a relocation incentive. In order to continue receiving the payments after moving, the employee must maintain a residence in the new geographic area; agencies decide whether that requirement has been met based on their own standards within general OPM guidance.

An agency may determine that a position is likely to be difficult to fill if the agency is likely to have difficulty recruiting candidates with the competencies (i.e., knowledge, skills, abilities, behaviors, and other characteristics) required for the position (or group of positions) in the absence of a relocation incentive based on a consideration of the factors listed in 5 CFR 575.206(b). An agency may also determine that a position is likely to be difficult to fill if OPM has approved the use of a direct-hire authority applicable to the position.

A relocation incentive may be paid only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.

An agency may waive the case-by-case approval requirement when the employee is a member of a group of employees subject to a mobility agreement or when a major organizational unit is being relocated to a new duty station. Under such a waiver, an agency must specify the group of employees covered, the conditions under which the waiver is approved, and the period of time during which the waiver may be applied. Groups of employees must be approved for relocation incentives using the same criteria that apply to individuals. (See 5 CFR 575.208(b).)

Relocation Incentive Payment

A relocation incentive may not exceed 25 percent of the employee’s annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed four years). With OPM approval, this cap may be raised to 50 percent (based on a critical agency need), not to exceed 100 percent of the employee’s annual rate of basic pay at the beginning of the service period. (See 5 CFR 575.209(c).) The incentive may be paid as an initial lump-sum payment at the beginning of the service period, in installments throughout the service period, as a final lump-sum payment upon completion of the service period, or in a combination of these methods.

Retention Incentives

An agency may pay a retention incentive to a current employee if the agency determines that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee and that the employee would be likely to leave the federal service in the absence of a retention incentive. It also must take into account the quality and availability of potential replacement employees under its succession planning.

An agency may pay a retention incentive to prevent an employee from leaving for another federal job before the closure or relocation of the employee’s office, facility, activity, or organization, if the agency determines that given the agency’s mission requirements and the employee’s competencies, the agency has a special need for the employee’s services that makes it essential to retain the employee in his or her current position before the closure or relocation. Agencies may approve a retention incentive under this circumstance for a group or category of employees. They further must review all retention incentives, including group incentives as described below, at least annually to determine if they still are warranted.

A retention incentive may be paid only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.

Payment of any retention incentive is subject to the aggregate limitation on pay in 5 CFR 530, subpart B (see Pay Limits).

Retention Incentive Payment

An agency must establish a single retention incentive rate for the employee, expressed as a percentage of the employee’s rate of basic pay, not to exceed 25 percent. With OPM approval, this cap may be increased to 50 percent based on a critical agency need. (See 5 CFR 575.309(e).) The incentive may be paid in installments after the completion of specified periods of service within the full period of service required by the service agreement or in a single lump sum after completion of the full period of service required by the service agreement. An agency may not pay a retention incentive as an initial lump-sum payment at the start of a service period or in advance of fulfilling the service period for which the retention incentive is received. A retention incentive installment payment may be computed at the full retention incentive percentage rate or at a reduced rate with the excess deferred for payment at the end of the full service period.

An agency may not offer or authorize a retention incentive for an individual prior to employment with the agency. An agency may not begin paying a retention incentive during the service period established by an employee’s recruitment or relocation incentive service agreement. However, a relocation incentive may be paid to an employee who is already receiving a retention incentive.

When no service agreement is required

For retention incentives that are paid in biweekly installments when no service agreement is required, an agency must review each determination to pay the incentive annually to determine whether payment is still warranted and certify this determination in writing.

An agency must reduce or terminate the retention incentive whenever payment at the original level is no longer warranted. In addition, an agency must terminate a retention incentive authorization when no service agreement is required if the employee is demoted or separated for cause, receives a rating of record of less than “fully successful” or equivalent, or the agency assigns the employee to a different position. (See 5 CFR 575.311(g).)

An agency must notify an employee in writing when it terminates a retention service agreement or a retention incentive when no service agreement is required. Termination or reduction of a retention incentive is not grievable or appealable.

Group retention incentives

An agency may pay a retention incentive of up to 10 percent of basic pay (or up to 50 percent with OPM approval, based on a critical agency need) to an eligible group or category of employees if the agency determines that the unusually high or unique qualifications of the group or a special need of the agency for the employees’ services makes it essential to retain the employees and that there is a high risk that a significant number of employees in the group would leave the agency in the absence of a retention incentive. A group retention incentive may be paid to an employee only when the employee’s rating of record under an official performance appraisal or evaluation system is at least “fully successful” or equivalent.

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