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                                     Order Code RL32261




DHS's Max-HR Personnel System: Regulations
      on Classification, Pay, and Performance
Management Compared With Current Law, and
                         Implementation Plans


                                 Updated May 4, 2007




                                   Barbara L. Schwemle
               Analyst in American National Government
                       Government and Finance Division
  DHS's Max-HR Personnel System: Regulations on
  Classification, Pay, and Performance Management
Compared With Current Law, and Implementation Plans

Summary
      The most recent legislative development on the implementation of a new
personnel system at the Department of Homeland Security (DHS) is that H.R. 1684,
DHS Authorization Act for FY2008, as ordered to be reported by the House
Committee on Homeland Security on March 28,2007, would repeal the authority for
that system. The bill is expected to be considered by the House in early May 2007.

    The DHS Secretary and the Director of the Office of Personnel Management
were authorized to prescribe joint regulations for a new human resources
management system for DHS employees with the enactment of P.L. 107-296, the
Homeland Security Act of 2002. The final regulations for that system, called Max-
HR, were published in the Federal Register on February 1, 2005. This report
compares the final regulations with current law under Title 5 of the United States
Code and relevant regulations under Title 5 of the Code of Federal Regulations.
Specifically, Subparts A (General Provisions), B (Classification), C (Pay and Pay
Administration), and D (Performance Management) of the final regulations are
examined.

      With regard to classification, pay, and performance management, the regulations
prescribe the following. The classification system will organize the department's
jobs into clusters by major occupational groups. Within each occupational cluster,
open pay bands with no steps will be established. Each pay band typically will have
four levels -- entry/developmental, full performance, senior expert, and supervisory.
Employees will progress through a pay band based on performance or enhanced skill
level. The pay system will provide an annual pay adjustment, supplemented by a
locality pay rate or a special pay rate in appropriate circumstances, to employees who
meet or exceed performance expectations. In addition, employees in a Full
Performance or higher pay band may receive a performance-based pay increase,
based primarily on accomplishing work assignments and achieving results.
Employees will not lose pay upon their transition to the pay system. The
performance management system ties employee performance appraisal to the DHS
mission and to specific performance standards based on job assignments. Quotas or
forced distributions will not be imposed on the performance ratings. A Homeland
Security Compensation Committee, chaired by the DHS Undersecretary for
Management, will provide options and/or recommendations to the Secretary on
various strategic compensation matters, including the annual adjustment of rate
ranges and locality and special pay rate supplements for the department's employees.
The committee will have 14 members, four of whom will represent labor
organizations granted national consultation rights. The regulations provide broad
policy parameters. DHS will issue implementing directives to provide the details of
these policies. The directive on performance management was published on March
23, 2006. Directives on other aspects of the new system are in development. Max-
HR is expected to be implemented in phases beginning in early 2007, with the first
performance-based pay adjustments being granted in January 2008.
Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
     Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
          Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
     FY2008 Budget and Personnel Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
     Legislation Pending in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Subpart A -- General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Subpart B -- Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    Classification Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
    Classification Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
    Transitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Subpart C -- Pay and Pay Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
    General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
    Overview of Pay System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
    Setting and Adjusting Rate Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
    Locality and Special Rate Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
    Performance-Based Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
    Pay Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
    Special Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
    Transitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Subpart D -- Performance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64



List of Tables
Table 1. Views of DHS and OPM Representatives on Selected Policies
    in the Final Regulations on Max-HR as Expressed at Senate
    and House Subcommittee Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Office of Human Capital (OHC) Appropriations, FY2005-FY2008 . . 10
Table 3. Department of Homeland Security Human Resources
    Management System: Final Regulations Compared With
    Current Law/Selected Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
        DHS's Max-HR Personnel System:
     Regulations on Classification, Pay, and
    Performance Management Compared With
     Current Law, and Implementation Plans

                                 Introduction
      President George W. Bush signed the Homeland Security Act of 2002 on
November 25, 2002, and it became P.L. 107-296. Title VIII, Subtitle E, Section 841
of the law amends Title 5 United States Code by adding a new Chapter 97 --
Department of Homeland Security (DHS) to Part III, Subpart I. The new §9701(a)
provides that, notwithstanding any other provision of Part III, the Secretary of
Homeland Security may, in regulations prescribed jointly with the Director of the
Office of Personnel Management (OPM), establish, and from time to time adjust, a
human resources management (HRM) system for some or all of the organizational
units of the Department of Homeland Security. The law states specific requirements
for the HRM system.1

      On February 20, 2004, DHS and OPM jointly published a proposed rule to
implement a new HRM system for DHS in the Federal Register.2 The final rule for
that system, called Max-HR, was published in the Federal Register on February 1,
2005.3 The design process that culminated in the proposed rule for the new system
was discussed in the rule's background section.4 Briefly, a design team, composed
of DHS program managers, union and employee representatives, DHS and OPM
human resource specialists, and private sector experts, conducted research and
meetings in the field to compile options for the new system. A senior review
committee, composed of DHS and OPM top management officials, major union
leaders, and several experts from academia, developed the options for consideration
by the DHS Secretary and the Director of OPM and their senior staff.



1
 See CRS Report RL31500, Homeland Security: Human Resources Management, by
Barbara L. Schwemle.
2
 U.S. Department of Homeland Security and U.S. Office of Personnel Management,
"Department of Homeland Security Human Resources Management System," Federal
Register, vol. 69, no. 34, February 20, 2004, pp. 8029-8071.
3
 U.S. Department of Homeland Security and U.S. Office of Personnel Management,
"Department of Homeland Security Human Resources Management System," Federal
Register, vol. 70, no. 20, February 1, 2005, pp. 5271-5347.
4
 "Designing Options for a New HR System," in February 20, 2004, proposed rule, op. cit.,
pp. 8031-8035.
                                        CRS-2

     Broad policy parameters are provided in the final regulations. The details of
these policies will be included in implementing directives to be issued by DHS. On
March 23, 2006, the directive on performance management was published.
Directives on other aspects of the new system are in development. The final
regulations include the following information on classification, pay, and performance
management.

     !   Classification. The department's jobs will be organized into clusters
         by major occupational groups. The current 15 grades and ten steps
         of the General Schedule pay system will be abolished and replaced,
         within each occupational cluster, by open pay bands without steps.
         There typically will be four levels -- entry/developmental, full
         performance, senior expert, and supervisory -- for each pay band.
         Salaries within the pay bands will be set based on mission
         requirements, labor market conditions, availability of funds, pay
         adjustments received by other federal employees, and any other
         relevant factors. Employees will progress through a pay band based
         on performance or enhanced skill level.

     !   Pay Adjustments. For each occupational cluster, there will be an
         annual pay adjustment, and locality pay rate and special pay rate
         supplements as appropriate, based on mission requirements, labor
         market conditions, availability of funds, pay adjustments received by
         other federal employees, and any other relevant factors. An
         employee must meet or exceed performance expectations to receive
         these pay adjustments. In addition, employees with a high level of
         performance that supports the accomplishment of the department's
         mission may receive a performance-based pay increase; higher
         increases would go to outstanding performers. The pay-outs for pay
         adjustments and awards will depend on DHS's funding. The
         formula that will be used to determine the size of performance-based
         pay adjustments has not yet been defined. Employees will not lose
         pay as they transition to the new system. The DHS Undersecretary
         for Management will chair a Homeland Security Compensation
         Committee which will provide options and/or recommendations to
         the Secretary on various strategic compensation matters, including
         the annual adjustment of rate ranges and locality and special pay rate
         supplements for the department's employees. Of the committee's 14
         members, four will represent labor organizations granted national
         consultation rights.

     !   Performance Management. Appraisal of employee performance will
         be tied to the DHS mission and to specific performance standards
         based on job assignments. Generally, three or four rating levels will
         be established. The system will not have quotas or forced
         distributions of performance ratings. Managers and supervisors will
         be trained to appraise employee performance. The directive on
         performance management published on March 23, 2006, identifies
         these core competencies: (1) achieving results, (2) technical
         proficiency, (3) customer service (except for positions in the 1811
                                         CRS-3

           and 1896 series), (4) teamwork/cooperation, (5) communications,
           and (6) representing the agency. Managers and supervisors have
           additional core competencies on assigning, monitoring, and
           evaluating work, and leadership. The directive provides for four
           rating levels -- "Achieved Excellence," "Exceeded Expectations,"
           "Achieved Expectations," and "Unacceptable."5

     The Senate Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia of the Committee on Homeland
Security and Governmental Affairs, and the House Subcommittee on the Federal
Workforce and Agency Organization of the Committee on Government Reform
conducted hearings on the final regulations shortly after they were published. The
testimony of Ronald James, then-Chief Human Capital Officer at DHS, and Ronald
Sanders, then Associate Director for Strategic Human Resources Policy at OPM, and
their written responses to questions for the hearing record provide additional
information about the policies embodied in the final regulations. Table 1 below
presents the views of Mr. James and Mr. Sanders as stated for the February 10, 2005,
Senate subcommittee hearing and the March 2, 2005, House subcommittee hearing
on issues related to classification, pay, and performance management.

     Table 1. Views of DHS and OPM Representatives on Selected
     Policies in the Final Regulations on Max-HR as Expressed at
              Senate and House Subcommittee Hearings

                 Issue                                     Views
       Senate Subcommittee on Oversight of Government Management, the Federal
    Workforce, and the District of Columbia of the Committee on Homeland Security and
                               Governmental Affairs Hearing
    job classification               "DHS will establish definitions for a small number
                                              of broad pay bands (typically 4-5), within
                                         occupational clusters. Grading criteria will be
                                          developed for these broad pay bands that will
                                             specify the type and range of difficulty and
                                         responsibility, qualifications, competencies, or
                                      other characteristics of the work encompassed by
                                        the band ... allow[ing] us to describe a range of
                                             work ..." (James and Sanders, same written
                                                                               response)
    performance evaluations           "OPM (or OPM and DHS) will treat performance
                                        evaluations for DHS employees under 5 U.S.C.
                                        chapter 97 as personnel actions for purposes of
                                         enforcing the ban against prohibited personnel
                                     practices under 5 U.S.C. §2302." (Sanders, written
                                                                              response)


5
 U.S. Department of Homeland Security, Management Directives System, Performance
Management, MD Number 3181, March 23, 2006. Provided to CRS by electronic mail, by
Human Resources staff at DHS, March 27, 2006.
                                   CRS-4

               Issue                                 Views
pass/fail system for rating   "my personal professional judgment is ... that we do
performance                   not want to use pass/fail anywhere beyond the entry
                                   level, the training level, and the school level."
                                                             (James, oral response)
annual pay adjustments          "DHS will have the following type of annual pay
                               adjustment features: market-based pay which will
                                  be based on a market survey approach; Locality
                               Rate Supplements which will be based on the cost
                               of labor at different localities or geographic areas;
                              and performance based pay increases which will be
                                      based on individual performance. The DHS
                                   compensation plan will also offer a special rate
                                supplement which will provide a higher pay level
                                         for subcategories of employees within an
                                    occupational cluster if warranted by current or
                              anticipated recruitment or retention needs." (James,
                                                                   written response)
locality pay                           "DHS will have greater flexibility in setting
                                 [locality rate supplements] based on labor market
                                conditions and other factors .... DHS may provide
                                 for different locality rate supplement percentages
                                for different occupational categories and different
                                            band levels." (James, written response)
Homeland Security                     "The HSCC will be an advisory body to the
Compensation Committee             Secretary for making annual recommendations
(HSCC)                           regarding strategic pay decisions such as budget
                               allocation for market and locality adjustments and
                                     aggregate review of performance ratings and
                                       performance payouts. The HSCC will also
                                     recommend process improvements or policy
                                 changes to improve program effectiveness. The
                                 Secretary or designee will make final decisions.
                               We appreciate the suggestion to publish internally
                                  the overall results of performance management
                                 decisions and will consider doing so ..." (James,
                                                                 written response)
                                     CRS-5

            Issue                                       Views
performance appraisal of        "[E]ach manager's goals will be based on his or her
managers                               manager's goals, thus creating a `line of sight'
                                 cascade that starts with the Secretary and his direct
                                  reports and is repeated through the chain, creating
                                   subsets of goals that all point to the Department's
                                        mission objectives. With this cascade comes
                                    responsibility and accountability for managers to
                                        not only set appropriate goals, but to actually
                                          nurture their employees to achieve success.
                                    Because employees' goals will be tied directly to
                                their manager's goals, the manager's success is tied
                                       to how well employees perform. And finally,
                                              managers will also be assessed on their
                                       management skills ... including their ability to
                                  justify and stand behind pay decisions. Employee
                                climate surveys and use of 360 degree performance
                                 appraisal systems are being seriously considered ...
                                 to ensure that employees have a voice in providing
                                  feedback on how well their leaders are leading ..."
                                                             (James, written response)
   House Subcommittee on the Federal Workforce and Agency Organization of the
                  Committee on Government Reform Hearing
communication of core             "We are not considering amending the regulations
competencies                    to provide that core competencies be communicated
                                in writing. During the meet-and-confer process, the
                                        participating labor organizations agreed that
                                           performance expectations (including core
                                             competencies) need not be in writing ....
                                 performance expectations, including those that may
                                   affect an employee's retention in the job, must be
                                 communicated to the employee prior to holding the
                                   employee accountable for them." (James, written
                                                                            response)
performance management          "We will emphasize a greater role for Departmental
system                                leaders in ensuring mission and individual goal
                                          alignment and holding individual employees
                                              accountable for results and ensuring that
                                 compensation decisions are driven by performance
                                .... employees along with their supervisor will work
                                       together to align their individual goals with the
                                 larger goals of the Department. By setting specific
                                          milestones and creating a direct line of sight
                                   between individual jobs and mission-achievement
                                      there will be a clear picture of what is expected
                                       during the performance cycle." (James, written
                                                                              response)
                                   CRS-6

            Issue                                     Views
mathematical formula for      "There are four variables ... performance rating, pay
performance payouts            pool and the dollars in the pay pool, and the ratings
                                    distribution ... let us focus on those people who
                                    `meet expectations,' `exceed expectations,' and
                                             who are `outstanding' .... Each of those
                               [performance] ratings has a point value. That point
                                        value is established at a higher headquarters
                               through oversight of the Compensation Committee.
                               The funding in that pay pool is also established at a
                                        higher headquarters with oversight from the
                                    Compensation Committee. You simply take the
                                rating, multiply it times the point value, and divide
                              the points into the dollars, and you get your share of
                              the pool.... The regulations absolutely positively bar
                                   and prohibit forced distributions of ratings. You
                              can't bust the budget because the pool is finite. You
                                      simply divide the available dollars in the pool
                                amongst the employees based on their rating. And
                                           the amount in the pool, the amount of the
                                  Department's payroll that will go to performance
                                 pay is set by the Secretary on the advice and input
                                 of the Compensation Committee, four members of
                               which are from the Department's two major unions
                                             ... they will determine how much of the
                                    Department's annual appropriations increase in
                                   payroll goes to performance, the national market
                                          adjustments and local market adjustments.
                                           Secretary reserves the right to make final
                              decisions.... They will decide how that is divided up
                              by location and occupation and how much goes into
                                  the performance pay pool...." and later, "There is
                                  enough in the performance pay pool to make sure
                                 that fully successful employees get shares that are
                                  worth something, those who exceed expectations
                                  get shares that are worth more, and those that are
                                                          outstanding get even more."
                                                              (Sanders, oral responses)
an employee who receives an   "If the employee is at the minimum level of pay, he
"unacceptable" performance        or she is unacceptable and everybody else in the
rating                              pay range goes up because they get across-the-
                                            board increases, the regulations require
                              management to take action in 90 days .... Either the
                                employee's performance improves and they move
                                 back up into the range with everyone else, or the
                                        Department either demotes or removes the
                                               employee." (Sanders, oral response)
                                             CRS-7

                 Issue                                           Views
    employee understanding of the             "will be measured through periodic employee
    pay system                                    attitude surveys .... Fair administration and
                                                meaningful performance adjustments will be
                                               gauged both by these surveys and by periodic
                                               quantitative analyses of pay adjustments data
                                                 (ratings given by managers and amounts of
                                          increases throughout the department) ... as well as
                                                   review of payout information by the DHS
                                                 Compensation Committee." (James, written
                                                                                      response)
    prohibition on forced                  "DHS will conduct ongoing evaluations .... DHS
    distributions or quotas             will deploy an automated performance management
                                         system ... will include a reporting feature that will
                                         provide the capability to produce standard reports
                                               that will identify trends and detect patterns in
                                                 distribution that indicate forced distribution
                                                           curves." (James, written response)

Sources: U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs,
Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of
Columbia, Unlocking the Potential Within Homeland Security: The New Human Resources System,
hearing, 109th Cong., 1st sess., Feb. 10, 2005 (Washington: GPO, 2005), pp. 17, 313, 318, 320, 321,
326, and 327. U.S. Congress, House Committee on Government Reform, Subcommittee on the
Federal Workforce and Agency Organization, The Countdown to Completion: Implementing the New
Department of Homeland Security Personnel System, hearing, 109th Cong., 1st sess., Mar. 2, 2005
(Washington: GPO, 2005), pp. 102, 108, 109, 219, 220, 224, 225, and 227. The views expressed
in the table are those of Ronald James, then-Chief Human Capital Officer at DHS, and Ronald
Sanders, then-Associate Director for Strategic Human Resources Policy at OPM.

Implementation
      According to a DHS and OPM Fact Sheet on the final regulations, the new
HRM system will cover about 110,000 of the department's 180,000 employees.6
Transportation Security Administration (TSA) employees, Inspector General
employees, and employees appointed under the Robert T. Stafford Disaster Relief
and Emergency Assistance Act will not be covered by the system. The Secret
Service is excluded from the labor-management relations provisions and its
Uniformed Division employees are not covered by the classification and pay
provisions. Blue-collar employees under the wage grade system are excluded from
the classification and pay provisions during the initial implementation of the system.
Members of the Senior Executive Service (SES) are covered by the government-wide
pay-for-performance system.

    At the time that the final regulations were published in February 2005, a phased
implementation of Max-HR according to the following timetable was envisioned:


6
  U.S. Department of Homeland Security, DHS and OPM Final Human Resource
Regulations Fact Sheet, January 26, 2005.      (Available on the Internet at
[http://www.dhs.gov], visited March 24, 2006.)
                                       CRS-8

     Time Period                         Implementation Steps
    Early in 2005    Communication outreach begins; Detailed design work,
                     including collaboration with employee representatives;
                     Meetings and focus groups held around the country.
    Spring 2005      Training of managers and supervisors begins; The labor
                     relations and adverse actions and appeals provisions
                     become effective.
    Summer 2005      Managers, supervisors, and employees receive performance
                     management training.
    Fall 2005        The performance management process begins.
    Early 2006       DHS Headquarters, Information Analysis and Infrastructure
                     Protection, Science and Technology, Emergency
                     Preparedness and Response, and Federal Law Enforcement
                     Training Center are converted to the new pay system. The
                     first rate range adjustment and performance pay-out is
                     scheduled for January 2007.
    Early 2007       U.S. Secret Service and U.S. Coast Guard (USCG) are
                     converted to the new pay system. The first rate range
                     adjustment and performance pay-out is scheduled for
                     January 2008. (The USCG performance pay-out is
                     scheduled for Summer 2008.)
    Early 2008       U.S. Customs and Border Protection, U.S. Immigration and
                     Customs Enforcement, and U.S. Citizenship and
                     Immigration Services are converted to the new pay system.
                     The first rate range adjustment and performance pay-out is
                     scheduled for January 2009.

      This timetable has since been revised. In early September 2005, DHS
announced in the department's newsletter that the employees who were initially
scheduled to move into Max-HR in early 2006 would instead do so in early 2007, at
the same time that the U.S. Secret Service and USCG employees are scheduled to
join the new system. The first rate range adjustment and performance pay-out for
these employees would be granted in January 2008. The remainder of the
implementation schedule was expected to remain the same. Commenting on the
revised schedule, Colleen M. Kelley, president of the National Treasury Employees
Union, stated that "leaving the rest of the calendar on the back end unchanged"
means that "DHS will be moving a larger number of employees into the pay system
at the same time, losing the advantages of a phased approach." She called for "a delay
of the entire rollout."7 The DHS Secretary is required by P.L. 109-295 to report to



7
 Louis C. LaBrecque, "DHS to Delay Implementation of MaxHR Pay System; Labor Battle
Continues," Government Employee Relations Report, vol. 43, September 13, 2005.
                                        CRS-9

the House and Senate Committees on Appropriations in January 2007 on an updated
plan for Max-HR (see the "Funding" section below.)

      In his report to DHS employees on the agency's results agenda, the Secretary of
Homeland Security, Michael Chertoff, stated that training and communications will
be ongoing as Max-HR becomes operational. During FY2006, among other
initiatives, the effectiveness of the department's training was to be evaluated, gaps
in employee competencies were to be further defined and addressed, and
opportunities for employees to develop their leadership capabilities were to be
enhanced.8

     On December 9, 2006, the Senate, by voice vote, confirmed Paul A. Schneider
to be the new Undersecretary for Management at DHS. (The previous
undersecretary, Janet Hale, who had been with DHS since its founding, left the
department in late May 2006.) During the Senate Committee on Homeland Security
and Governmental Affairs hearing on his confirmation, he reportedly assured Senator
Susan Collins that DHS officials would create "an effective method of evaluating
employees' job performance and would work with unions on structuring the pay
aspects as well as grievance procedures" of Max-HR.9

     Funding.10 The President's FY2007 budget requested an appropriation of
$71.449 million to fund Max-HR, $41.749 million more than the amount provided
in FY2006. The full time equivalent (FTE) employees attached to the account were
27, an increase of 15 FTEs over FY2006. Almost 94% of the requested money was
for salaries and benefits ($3.153 million) and advisory and assistance services
($63.984 million). Accounting for the increased funding were (1) implementation
costs of the new pay system for employees who were originally scheduled to be
converted in FY2006 ($15 million), (2) implementation and operational costs for a
market- and performance-based compensation system in FY2007 ($22 million), and
(3) funding the Homeland Security Labor Relations Board (HSLRB) ($4.749
million).11 P.L. 109-295, the Department of Homeland Security Appropriations Act
for FY2007, provides funding of $25 million for Max-HR (some $46.449 million
below the President's request).




8
 U.S. Department of Homeland Security, Securing the Success of DHS Results, 2005, p. 14,
available at [http://www.dhs.gov], visited March 24, 2006.
9
 Stephen Barr, "Personnel Policy Challenges Await the New DHS Management Chief," The
Washington Post, December 14, 2006, p. D4.
10
  For an analysis of the FY2007 appropriations for Max-HR, see the "Personnel Issues"
section of CRS Report RL33428, Homeland Security Department: FY 2007 Appropriations,
coordinated by Jennifer E. Lake and Blas Nunez-Neto. For the FY2006 appropriations, see
the "Personnel Issues" section of CRS Report RL32863, Homeland Security Department:
FY2006 Appropriations, coordinated by Jennifer E. Lake and Blas Nunez-Neto.
11
  U.S. Department of Homeland Security, FY2007 Congressional Justification,
Departmental Management and Operations, Under Secretary for Management, Office of
Human Capital and Office of Human Capital -- MaxHR, pp. USM-43 - USM-50.
                                           CRS-10

FY2008 Budget and Personnel Issues
     The Office of Human Capital (OHC) at DHS reports to the Under Secretary for
Management, and its appropriation is included in that of the Under Secretary. The
OHC appropriation has two parts. The first part, formerly labeled "HR Operations"
and now labeled "OHC," includes funding for the office which is responsible for the
overall management and administration of human capital in DHS. As such, the
office establishes policy and procedures and provides oversight, guidance, and
leadership for the department's human resources functions. The second part, formerly
labeled "MaxHR" and now labeled "OHC -- Operational Initiatives and HR
Management System," includes funding for the OHC organization, which "is
responsible for creating, implementing, and operating DHS' new human resources
system, ensuring that organizational goals and individual work performance are
linked, and that employees are compensated based on their contributions to agency
performance." The OHC organization also "is responsible for ensuring that DHS
recruits, hires, trains, and retains the very best workforce, provides the highest quality
leadership development, and creates a performance culture in the workforce to ensure
DHS succeeds in its mission."12 Table 2 below shows the funding and staff for the
OHC from FY2005 through the budget request for FY2008.

      Table 2. Office of Human Capital (OHC) Appropriations,
                          FY2005-FY2008
                                         (in millions)
                                                                                     FY2008
                                                                                     Request
                       FY2005         FY2006          FY2007          FY2008
     Account                                                                        Compared
                       Enacted        Enacted         Enacted         Request
                                                                                    to FY2007
                                                                                     Enacted
 "OHC"                         $7             $9                $9          $10               $1
 (formerly "HR
 Operations")

 "OHC --                      $36            $30            $25*            $15             -$10
 Operational
 Initiatives and
 HR Management
 System"
 (formerly
 "MaxHR")

 Total                        $43            $39              $34           $25              -$9

 Staffing (full                49            62                 53           60                7
 time equivalent,                        (12 for
 FTE, positions)                      "MaxHR")

Note: This amount does not reflect the transfer of $5 million from "MaxHR" to the Transportation
Security Administration as provided by Section 21101 of P.L. 110-5, the Revised Continuing
Appropriations Resolution for FY2007, enacted on Feb. 15, 2007, (121 Stat. 8). The numbers in the
table are rounded.


12
  FY2008 DHS Justifications, Departmental Management and Operations, Undersecretary
for Management, p. USM-2.
                                           CRS-11

     Sources: P.L. 108-334, Oct. 18, 2004, 118 Stat. 1298; P.L. 109-90, Oct. 18, 2005, 119 Stat.
2064; P.L. 109-295, Oct. 4, 2006, 120 Stat. 1355, at 1356, and FY2008 DHS Justifications,
Departmental Management and Operations, Undersecretary for Management, Office of Human
Capital, and Office of Human Capital -- Max-HR, pp. USM-39 - USM-44.

     As directed by the conference report13 accompanying P.L. 109-295, the
Department of Homeland Security Appropriations Act for FY2007, the Under
Secretary for Management submitted an expenditure plan for the DHS Human
Resources Management System (HRMS) (formerly "MaxHR") for FY2007 to the
House and Senate Committees on Appropriations on February 1, 2007. The report's
cover letter states that in FY2007 the HRMS "will be broadened ... to encompass
additional aspects of FY2007 Human Capital Operational Plan (HCOP), including
an increased focus on employee recruiting and advanced homeland security related
education."14 Among other data, the report states that the contractor Northrop
Grumman Information Technology (NGIT) received a contract worth almost $3
million dollars to provide services through January 31, 2007, related to program
management; pay, performance, and classification; and training, communications,
and organizational change management at DHS. According to the report, NGIT is
being awarded another contract, worth more than $16 million, to provide services to
the department through September 30, 2007, in the same areas identified above and
labor relations.15

     The transfer of the Office of Federal Law Enforcement Training Accreditation
(FLETA) from the Federal Law Enforcement Training Center to the OHC accounts
for the increase of $1 million and seven full-time equivalent employees over the
FY2007 appropriation for the "OHC" account. Almost 93% of the money requested
for FY2008 under this account is for salaries and benefits ($8 million) and advisory
and assistance services ($2 million) that includes services acquired by contract from
non-federal sources.16 The appropriation will fund continued implementation of the
Human Capital Operational Plan for FY2007 to FY2009, development of an
employee talent bank for use throughout the department, creation of standards to
assess and evaluate learning and development programs, and participation of all new
DHS employees in a department-wide orientation program.17 Some 76% of the
money requested for FY2008 under the "OHC -- Operational Initiatives and HR
Management System" account is for advisory and assistance services ($11 million).


13
  U.S. Congress, Conference Committees, 2006, Making Appropriations for the Department
of Homeland Security For the Fiscal Year Ending September 30, 2007, and For Other
Purposes, conference report to accompany H.R. 5441, 109th Cong., 2nd sess., H.Rept. 109-
699 (Washington, DC: GPO, 2006), p. 119.
14
  Letter to Representative David E. Price, Chairman, House Subcommittee on Homeland
Security of the House Committee on Appropriations from Paul A. Schneider, Under
Secretary for Management, U.S. Department of Homeland Security, February 1, 2007.
15
 Report to Congress, Spend Plan for MaxHR, Office of Human Capital, Department of
Homeland Security, January 4, 2007, p. 7. Accompanied the letter cited in footnote 5.
16
  FY2008 DHS Justifications, Departmental Management and Operations, Undersecretary
for Management, Office of Human Capital, pp. USM-39 - USM-41.
17
 FY2008 DHS Justifications, Under Secretary for Management, Strategic Context, p.
USM-3.
                                         CRS-12

No funding is requested for salaries and benefits.18 The appropriation will fund
continued training of the DHS workforce in pay for performance and a new pay
system pilot project that will cover employees in the department who work in the
intelligence area. The pilot will be implemented jointly with the Director of National
Intelligence who is developing a pilot pay system for employees of the intelligence
agencies. It also will fund investment in recruitment and retention programs along
with learning and development initiatives to address gaps in skills and competencies,
and deployment of career paths and rotations to facilitate the mobility of DHS
employees through various leadership positions in the department.19

      There are new incumbents for both the Under Secretary and Chief Human
Capital Officer positions at DHS. Paul Schneider assumed the former position on
February 1, 2007, and Marta Brito Perez the latter position on September 18, 2006.
During his confirmation hearing on December 6, 2006, Mr. Schneider told the
members of the Senate Committee on Homeland Security and Governmental Affairs
that he would make sure that DHS officials create an effective method of evaluating
employees' job performance.

      In January 2007, the Culture Task Force of the Homeland Security Advisory
Council issued a report to the DHS Secretary. Among its recommendations were that
DHS staff be referred to as "employees" or "members" of DHS and not as "human
capital," and that "members of the headquarters" be required to visit and listen "to
employees and engage and support groups outside the headquarters" and respond
within 30 days on actions taken to address their concerns.20 The task force believes
that "there can be no hierarchically imposed `single culture' within the Department,"
but that "an overarching and blended culture can be developed that is based on
threads of common values, goals, and focus of mission among DHS headquarters and
its component organizations." With regard to developing and sustaining such a
culture, the task force advised that "there are organizations in the Private Sector that
will deploy and embed within DHS qualified, objective, emotionally and
organizationally detached personnel to help develop the leadership's vision and
strategic goals of creating a Homeland Security (rather than DHS) Mission Culture
and then monitor, objectively test, and support progress in achieving, continually
improving and sustaining an operationally focused, innovation and people rewarding


18
  FY2008 DHS Justifications, Departmental Management and Operations, Undersecretary
for Management, Office of Human Capital -- Max-HR, pp. USM-42 - USM-44.
19
   FY2008 DHS Justifications, Under Secretary for Management, Strategic Context, p.
USM-4. On January 23, 2007, 27 employees in General Schedule grades 14 and 15 and
representing various components of DHS began a year-long fellowship program designed
to prepare them for future leadership positions in the department. The program is intended
to establish a common culture at DHS and encourage cooperation among the different
agencies that comprise the department.
20
  Homeland Security Advisory Council, Report of the Culture Task Force, January 2007,
pp. 2-3. Section 871 of P.L. 107-296 (116 Stat. 2243) authorized the council which provides
advice and recommendations to the DHS Secretary on homeland security matters. In June
2006, Secretary Chertoff directed the council to establish the task force "to provide
observations and recommendations for achieving and maintaining an empowering, energetic,
dedicated, mission-focused culture within the Department ... ."
                                     CRS-13

culture."21 The task force recommended that such contract employees work under
the direction of a senior (preferably career) DHS employee and with staff from the
department's component agencies.

Legislation Pending in the 110th Congress
     Representative Bennie Thompson introduced H.R. 1684, the Department of
Homeland Security Authorization Act for FY2008, on March 26, 2007. It was
referred to the House Committee on Homeland Security where it was marked up and
ordered to be reported, on a 26-0 vote, on March 28, 2007. During the markup, an
amendment to repeal the authority for the new human resources management system
at DHS that was offered by Representative Sheila Jackson-Lee was agreed to on a 17-
13 vote. H.R. 1684 is expected to be considered by the House in early May 2007.

     This report compares the final regulations for Subparts A (General Provisions),
B (Classification), C (Pay and Pay Administration), and D (Performance
Management) of the Department of Homeland Security's HRM system with current
law under Title 5 United States Code and relevant regulations under Title 5 Code of
Federal Regulations. For an analysis of the regulations for Subpart E on Labor-
Management Relations and the court case which resulted from those rules, see CRS
Report RL32255, Homeland Security: Final Regulations for the Department of
Homeland Security Human Resources Management System (Subpart E) Compared
With Current Law, by Jon O. Shimabukuro; and CRS Report RL33052, Homeland
Security and Labor-Management Relations: NTEU v. Chertoff, by Thomas J. Nicola
and Jon O. Shimabukuro. P.L. 107-296, the Homeland Security Act of 2002,
amended Title 5 provisions that are applicable to most federal employees, and it is
these provisions (rather than those which have been provided in separate statutes to
employees at the Internal Revenue Service, Federal Aviation Administration,
Transportation Security Administration, Department of Defense, and the National
Aeronautics and Space Administration) that are compared with the proposed DHS
regulations.




21
     Ibid., pp. 5-6.
                                                                    CRS-14

 Table 3. Department of Homeland Security Human Resources Management System: Final Regulations Compared
                                   With Current Law/Selected Regulations
                 Current Law/Selected Regulations                                                Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
                                                       Subpart A -- General Provisions
5 U.S.C. §9701. Establishment of human resources management               §9701.101. Purpose. To establish a system that is mission-centered,
system. (a) Notwithstanding any other provision of this part, the         performance-focused, flexible, contemporary, and excellent; that
Secretary of Homeland Security may, in regulations prescribed jointly     generates respect and trust through employee involvement; that is based
with the Director of the Office of Personnel Management, establish, and   on the principles of merit and fairness embodied in the statutory merit
from time to time adjust, a human resources management system for         system principles; and that complies with all other applicable laws.
some or all of the organizational units of the Department of Homeland
Security.
Authority derives from 5 U.S.C. §9701(a).                                 §9701.102. Eligibility and coverage. All DHS civilian employees are
                                                                          eligible for coverage under one or more subparts of 5 CFR Part 9701
                                                                          except those covered by a provision of law outside the chapters of Title
                                                                          5 United States Code identified in §9701.104 which can be waived. For
                                                                          example Transportation Security Administration (TSA) employees,
                                                                          employees appointed under the Robert T. Stafford Disaster Relief and
                                                                          Emergency Assistance Act, Secret Service Uniformed Division
                                                                          members, Coast Guard Academy faculty members, and Coast Guard
                                                                          military members are not eligible for coverage under any classification
                                                                          or pay system established under Subpart B or C. Each subpart provides
                                                                          specific information regarding coverage.
                                                                   CRS-15

                Current Law/Selected Regulations                                               Final DHS Regulations
                  Title 5 United States Code and
                Title 5 Code of Federal Regulations
                                                                       Subpart A becomes applicable to all eligible employees 30 days after
                                                                       the date of publication in the Federal Register.
                                                                       With respect to Subparts B, C, and D, the Secretary or designee may, at
                                                                       his or her sole and exclusive discretion and after coordination with
                                                                       OPM, apply one or more of these subparts to a specific category or
                                                                       categories of eligible civilian employees at any time. With respect to
                                                                       any given category of civilian employees, the Secretary or designee may
                                                                       apply some of these subparts, but not others, and such coverage
                                                                       determinations may be made effective on different dates (e.g., in order
                                                                       to phase in coverage under a new classification, pay, and performance
                                                                       management system).
                                                                       DHS will notify affected employees and labor organizations in advance
                                                                       of the application of one or more subparts to them.
                                                                       Until the Secretary or designee makes such a determination to apply the
                                                                       provisions of one or more subparts to a particular category or categories
                                                                       of eligible DHS employees, those employees will continue to be
                                                                       covered by the applicable federal laws and regulations that would apply
                                                                       to them in the absence of 5 CFR Part 9701. All personnel actions
                                                                       affecting DHS employees must be based on the federal laws and
                                                                       regulations applicable to them on the effective date of the action.
5 U.S.C. Chapter 53, Subchapter VIII -- Pay for the Senior Executive   Any new DHS classification, pay, or performance management system
Service.                                                               covering Senior Executive Service (SES) members must be consistent
                                                      CRS-16

                Current Law/Selected Regulations                                 Final DHS Regulations
                  Title 5 United States Code and
                Title 5 Code of Federal Regulations
                                                         with the policies and procedures established by the government-wide
                                                         SES pay-for-performance system authorized by 5 U.S.C. Chapter 53,
                                                         Subchapter VIII, and applicable implementing regulations issued by
                                                         OPM. If the Secretary determines that SES members employed by
                                                         DHS should be covered by classification, pay, or performance
                                                         management provisions that differ substantially from the government-
                                                         wide SES pay-for-performance system, the Secretary and the Director
                                                         must issue joint regulations consistent with all of the requirements of 5
                                                         U.S.C. §9701.
                                                         At his or her sole and exclusive discretion, the Secretary or designee
                                                         may, after coordination with OPM, rescind the application of one or
                                                         more subparts to a particular category of employees and prescribe
                                                         implementing directives for converting that category of employees to
                                                         coverage under applicable Title 5 provisions. DHS will notify affected
                                                         employees and labor organizations in advance of such a decision.
                                                         The Secretary or other authorized DHS official may exercise an
                                                         independent legal authority to establish a parallel system that follows
                                                         some or all of the requirements in 5 CFR Part 9701 for a category of
                                                         employees who are not eligible for coverage under 5 U.S.C. §9701.
Authority derives from 5 U.S.C. §9701(a).                §9701.103. Definitions. Various terms are defined, including:
                                                         "Authorized agency official" means the Secretary or an official who is
                                                         authorized to act for the Secretary in the matter concerned.
                                                                        CRS-17

                  Current Law/Selected Regulations                                                    Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                              "Coordination" means the process by which DHS, after appropriate
                                                                              staff-level consultation, officially provides OPM with notice of a
                                                                              proposed action and intended effective date. If OPM concurs, or does
                                                                              not respond to that notice within 30 calendar days, DHS may proceed
                                                                              with the proposed action. However, if OPM indicates the matter has
                                                                              government-wide implications or consequences, DHS will not proceed
                                                                              until the matter is resolved. The coordination process is intended to
                                                                              give due deference to the flexibilities afforded DHS by the Homeland
                                                                              Security Act and the regulations in 5 CFR Part 9701, without
                                                                              compromising OPM's institutional responsibility to provide
                                                                              government-wide oversight in HRM programs and practices.
                                                                              "Implementing directives" means directives issued at the departmental
                                                                              level by the Secretary or designee to carry out any policy or procedure
                                                                              established in accordance with 5 CFR Part 9701. These directives may
                                                                              apply department-wide or to any part of the department as determined
                                                                              by the Secretary at his or her sole and exclusive discretion.
5 U.S.C. §2105. Employee.                                                     "Employee" means an employee within the meaning of that term in 5
(a) "Employee" means an officer and an individual who is appointed in         U.S.C. §2105. "Secretary" means the Secretary of Homeland Security
the civil service by one of the following acting in an official capacity --   or, as authorized, the Deputy Secretary of Homeland Security.
the President; a Member or Members of Congress, or the Congress; a            "Secretary or designee" means the Secretary or a DHS official
member of a uniformed service; an individual who is an employee               authorized to act for the Secretary in the matter concerned who serves as
under this section; the head of a government controlled corporation; or       the Undersecretary for Management or as DHS' Chief Human Capital
                                                                       CRS-18

                 Current Law/Selected Regulations                                                 Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
an adjutant general designated by the Secretary concerned under 32         Officer.
U.S.C. §709(c). It also means an officer and an individual engaged in
the performance of a federal function under authority of law or an
executive act; and subject to the supervision of an individual named
above while engaged in the performance of the duties of the position.
5 U.S.C. §9701. Establishment of human resources management                §9701.104. Scope of authority. Subject to the requirements and
system.                                                                    limitations in 5 U.S.C. §9701, these Title 5 chapters and related
(b)(c) The HRM system must be flexible and contemporary. It cannot         regulations may be waived or modified: Chapter 43 (performance
waive, modify, or otherwise affect:                                        appraisal systems); Chapter 51 (General Schedule (GS) job
                                                                           classification); Chapter 53 (pay for GS employees, pay and job grading
     -- the public employment principles of merit and fitness at 5         for Federal Wage System employees, and pay for certain other
    U.S.C. §2301, including the principles of hiring based on merit,       employees); Chapter 71 (labor relations); Chapter 75 ( adverse actions
    fair treatment without regard to political affiliation or other non-   and certain other actions); and Chapter 77 (appeal of adverse actions
    merit considerations, equal pay for equal work, and protection of      and certain other actions).
    employees against reprisal for whistleblowing;

     -- any provision of 5 U.S.C. §2302 relating to prohibited
    personnel practices;

     -- any provision of law referred to in 5 U.S.C. §2302(b)(1)(8)(9);
    or any provision of law implementing any provision of law
    referred to in 5 U.S.C. §2302(b)(1)(8)(9) by providing for equal
                                                                      CRS-19

                 Current Law/Selected Regulations                                                 Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
     employment opportunity through affirmative action; or providing
     any right or remedy available to any employee or applicant for
     employment in the civil service;

      -- Subparts A (General Provisions), B (Employment and
     Retention), E (Attendance and Leave), G (Insurance and
     Annuities), and H (Access to Criminal History Record
     Information) of Part III of Title 5 United States Code; and Chapters
     41 (Training), 45 (Incentive Awards), 47 (Personnel Research
     Programs and Demonstration Projects), 55 (Pay Administration),
     57 (Travel, Transportation, and Subsistence), 59 (Allowances), 72
     (Antidiscrimination, Right to Petition Congress), 73 (Suitability,
     Security, and Conduct), and 79 (Services to Employees) of Title 5;
     or

      -- any rule or regulation prescribed under any provision of law
     referred to in any of the statements in bullets immediately above.
5 U.S.C. §9701. Establishment of human resources management                 §9701.105. Continuing collaboration. Relates to the participation of
system.                                                                     employee representatives in developing implementing directives.
(h) Effective five years after the conclusion of the transition period
defined under §1501 of P.L. 107-296, all authority to issue regulations
under the section (including regulations which would modify,
                                                                      CRS-20

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
supersede, or terminate any regulations previously issued under the
section) must cease to be available. The transition period is the 12-
month period that began on the act's effective date. The act's effective
date was 60 days after the act's enactment date of November 25, 2002.
Authority derives from 5 U.S.C. §9701(a)-(c).                              §9701.106. Relationship to other provisions. Title 5, United States
                                                                           Code, is waived or modified to the extent authorized by 5 U.S.C. §9701
                                                                           to conform to 5 CFR Part 9701. This part must be interpreted in a way
                                                                           that recognizes the critical mission of DHS. Each provision must be
                                                                           construed to promote the swift, flexible, effective day-to-day
                                                                           accomplishment of the mission, as defined by the DHS Secretary or
                                                                           designee. The interpretation of the regulations by DHS and OPM must
                                                                           be accorded great deference.
5 U.S.C. Chapter 43 (Performance Appraisal; Chapter 51                     For the purpose of applying other provisions of law or Government-
(Classification); Chapter 53 (Pay Rates and Systems); Chapter 71           wide regulations that reference provisions under 5 U.S.C. Chapters 43,
(Labor-Management Relations); Chapter 75 (Adverse Actions); and            51, 53, 71, 75, and 77, the referenced provisions are not waived but are
Chapter 77 (Appeals).                                                      modified consistent with the corresponding regulations in 5 CFR Part
                                                                           9701, except as otherwise provided in this part or in DHS implementing
                                                                           directives. Applications of this rule include, but are not limited to, the
                                                                           following:
                                                                           If another provision of law or Government-wide regulations requires
                                                                           coverage under one of the chapters modified or waived under 5 CFR
                                                                       CRS-21

                 Current Law/Selected Regulations                                                 Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. §§4521-4523. Award to Law Enforcement Officers for               Part 9701 (i.e., 5 U.S.C. Chapters 43, 51, 53, 71, 75, and 77), DHS
Foreign Language Capabilities; 5 U.S.C. §5545b (Pay for firefighters);    employees are deemed to be covered by the applicable chapter
5 U.S.C. §5545(d) (hardship or hazard pay differentials); 5 U.S.C.        notwithstanding coverage under a system established under this part.
§§5753-5754 (Recruitment and relocation bonuses and Retention             Selected examples of provisions that continue to apply to any DHS
allowances); 5 U.S.C. §5948 (Physicians comparability allowances);        employees (notwithstanding coverage under Subparts B through G)
P.L. 101-509, Sec. 407, 5 U.S.C. §5305 note (Relocation payments for      include, but are not limited to: foreign language awards for law
law enforcement officers);                                                enforcement officers; pay for firefighters; differentials for duty
                                                                          involving physical hardship or hazard; recruitment, relocation, and
                                                                          retention payments; physicians' comparability allowances; and the
                                                                          higher cap on relocation bonuses for law enforcement officers.
                                                                          Application of the back pay law with regard to attorney fees and labor
                                                                          relations will be consistent with §9701.706(h) and §9701.517,
                                                                          respectively.
5 CFR Part 300, Subpart F (Time-in-Grade Restrictions); 5 U.S.C.          When a specified category of employees is covered by a classification
§5755 (Supervisory differentials); P.L. 101-509, Sec. 404 and 404, 5      and pay system established under Subparts B and C, the following
U.S.C. 5303 note (Special rates and Special pay adjustments for law       provisions do not apply: time-in-grade restrictions that apply to
enforcement officers).                                                    competitive service GS positions; supervisory differentials; and law
                                                                          enforcement officer special rates and geographic adjustments.
42 U.S.C. §2000e (Equal Employment Opportunity); 29 U.S.C. §621           Nothing in this part waives, modifies or otherwise affects the
(Age discrimination in employment); 29 U.S.C. §791 (Employment of         employment discrimination laws that the Equal Employment
individuals with disabilities); 29 U.S.C. §206(d) (Prohibition of sex     Opportunity Commission (EEOC) enforces under 42 U.S.C. §2000e et
discrimination); 29 CFR Part 1614 -- Federal Sector Equal                 seq., 29 U.S.C. §621 et seq., 29 U.S.C. §791 et seq., and 29 U.S.C.
                                                                  CRS-22

                Current Law/Selected Regulations                                              Final DHS Regulations
                  Title 5 United States Code and
                Title 5 Code of Federal Regulations
Employment Opportunity (Subparts A-F, including Agency Program to      §206(d). Employees and applicants for employment in DHS will
Promote Equal Employment Opportunity, Appeals and Civil Actions,       continue to be covered by EEOC's federal sector regulations found at
Remedies and Enforcement).                                             29 CFR Part 1614.




Authority derives from 5 U.S.C. §9701(a).                              §9701.107. Program evaluation. DHS will establish procedures for
                                                                       evaluating the regulations and their implementation. Designated
                                                                       employee representatives will be provided with an opportunity to be
                                                                       briefed and a specified timeframe to provide comments on the design
                                                                       and results of program evaluations. Employee representatives will be
                                                                       involved with the identification of the scope, objectives, and
                                                                       methodology to be used in program evaluation and review of draft
                                                                       findings and recommendations. Involvement in the evaluation process
                                                                       does not waive the rights of any party under applicable law or
                                                                       regulations.
                                                         Subpart B -- Classification
                                                                  General
DHS authority for Subpart B derives from 5 U.S.C. §9701(a)-(c).        §9701.201. Purpose. Subpart B contains regulations establishing a
                                                                       CRS-23

                 Current Law/Selected Regulations                                                    Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. Chapter 51 -- Classification                                        classification structure and rules for covered DHS employees and
5 U.S.C. §5101. Purpose. To provide a plan for classification of             positions to replace the 5 U.S.C. Chapter 51 classification structure and
positions whereby in determining the rate of basic pay which an              rules and the 5 U.S.C. Chapter 53, Subchapter IV job grading system, in
employee will receive, the principle of equal pay for substantially equal    accordance with the merit principle of equal pay for work of equal
work will be followed, and variations in rates of basic pay paid to          value. Any classification system must be established in conjunction
different employees will be in proportion to substantial differences in      with the pay system described in Subpart C.
the difficulty, responsibility, and qualification requirements of the work
performed and to the contributions of employees to efficiency and
economy in the service. Individual positions will, in accordance with
their duties, responsibilities, and qualification requirements, be so
grouped and identified by classes and grades, and the various classes
will be so described in published standards, that the resulting position-
classification system can be used in all phases of personnel
administration.
5 U.S.C. Chapter 53, Subchapter IV -- Prevailing Rate Systems
5 U.S.C. §5341. Policy. It is the policy of Congress that rates of pay of
prevailing rate employees be fixed and adjusted from time to time as
nearly as is consistent with the public interest in accordance with
prevailing rates and be based on principles that there will be equal pay
for substantially equal work for all prevailing rate employees who are
working under similar conditions of employment in all agencies within
the same local wage area; there will be relative differences in pay within
                                                                      CRS-24

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
a local wage area when there are substantial or recognizable differences
in duties, responsibilities, and qualification requirements among
positions; the level of rates of pay will be maintained in line with
prevailing levels for comparable work within a local wage area; and the
level of rates of pay will be maintained so as to attract and retain
qualified prevailing rate employees.
Authority derives from 5 U.S.C. §9701(a).                                  §9701.202. Coverage. Subpart B applies to eligible DHS employees
                                                                           and positions listed below, subject to a determination by the Secretary
                                                                           or designee under §9701.102(b).
5 U.S.C. Chapter 53, Subchapter III -- General Schedule Pay Rates          Eligible for coverage are: employees and positions that would
5 U.S.C. Chapter 53, Subchapter IV -- Prevailing Rate Systems              otherwise be covered by the GS classification system; employees and
5 U.S.C. §5376. Pay for certain senior-level positions                     positions that would otherwise be covered by a prevailing rate system;
5 U.S.C. Chapter 53, Subchapter VIII -- Pay for the Senior Executive       employees in senior-level (SL) and scientific or professional (ST)
Service                                                                    positions who would otherwise be covered by 5 U.S.C. §5376; and SES
                                                                           members who would otherwise be covered by 5 U.S.C. Chapter 53,
                                                                           Subchapter VIII, subject to §9701.102(d).
5 U.S.C. Chapter 51 -- Classification (includes classification and         §9701.203. Waivers. When a specified category of employees is
grading of positions)                                                      covered by a classification system established under Subpart B, 5
5 U.S.C. §5346. Job grading system                                         U.S.C. Chapter 51 and 5 U.S.C. §5346, and related regulations, are
5 U.S.C. §5108. Classification of positions above GS-15                    waived with respect to that category of employees, except as provided
                                                                          CRS-25

                  Current Law/Selected Regulations                                                    Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                              immediately below, in §9701.106, and §9701.222(d) (with respect to
                                                                              OPM's authority under 5 U.S.C. §§5112(b) and 5346(c) to act on
                                                                              requests for review of classification decisions). 5 U.S.C. §5108 is not
                                                                              waived.
5 U.S.C. §5102. Definitions; application (unless otherwise noted)             §9701.204. Definitions.
"Grade" includes all classes of positions which, although different with      "Band" means a work level or pay range within an occupational cluster.
respect to kind or subject-matter of work, are sufficiently equivalent as
to level of difficulty and responsibility; and level of qualification
requirements of the work; to warrant their inclusion within one range of
rates of basic pay in the General Schedule.

"Basic pay" means the total amount of pay received during any one             "Basic pay" means an employee's rate of pay before any deductions and
calendar year at the rate fixed by law or administrative action for the       exclusive of additional pay of any kind, except as expressly provided by
position ... including night and environmental differentials for              law or regulation. It includes locality and special rate supplements for
prevailing rate employees, but before any deductions and exclusive of         the specific purposes prescribed in §§9701.332(c) and 9701.333.
additional pay of any other kind. [5 CFR §530.202]

"Classification" means the analysis and identification of a position and      "Classification" also referred to as job evaluation, means the process of
placing it in a class under the position-classification plan established by   analyzing and assigning a job or position to an occupational series,
OPM under 5 U.S.C. Chapter 51. [5 CFR §511.101(c)]                            cluster, and band for pay and other related purposes.
                                                                       CRS-26

                  Current Law/Selected Regulations                                                  Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                            "Competencies' means the measurable or observable knowledge, skills,
                                                                            abilities, behaviors, and other characteristics required by a position.
"Class" or "class of positions" includes all positions which are            "Occupational cluster" means a grouping of one or more associated or
sufficiently similar, as to kind or subject-matter of work; level of        related occupations or positions. An occupational cluster may include
difficulty and responsibility; and the qualification requirements of the    one or more occupational series.
work; to warrant similar treatment in personnel and pay administration.
                                                                            "Occupational series" means the number OPM or DHS assigns to a
                                                                            group or family of similar positions for identification purposes.


"Position" means the work, consisting of the duties and responsibilities,   "Position" or "Job" means the duties, responsibilities, and related
assigned by competent authority for performance by an employee. [5          competency requirements that are assigned to an employee whom the
CFR §511.101(e)]                                                            Secretary or designee approves for coverage under §9701.202(a).
Classification of positions is not subject to collective bargaining.        §9701.205. Bar on collective bargaining. As provided in the
                                                                            definition of "conditions of employment" in §9701.504, any
                                                                            classification system established under Subpart B is not subject to
                                                                            collective bargaining. This bar on collective bargaining applies to all
                                                                            aspects of the classification system, including but not limited to
                                                                            coverage determinations, the design of the classification structure, and
                                                                            classification methods, criteria, and administrative procedures and
                                                                            arrangements.
                                                                         CRS-27

                  Current Law/Selected Regulations                                                   Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                Classification Structure
5 U.S.C. §5106. Basis for classifying positions                               §9701.211. Occupational clusters. For purposes of classifying
Each position is placed in its appropriate class on the basis of the duties   positions, DHS may, after coordination with OPM, establish
and responsibilities of the position and the qualifications required by       occupational clusters based on factors such as mission or function;
those duties and responsibilities. Each class is placed in its appropriate    nature of work; qualifications or competencies; career or pay
grade on the basis of the level of difficulty, responsibility, and            progression patterns; relevant labor-market features; and other
qualification requirements of the work of the class.                          characteristics of those occupations or positions. DHS must document
                                                                              in implementing directives the criteria and rationale for grouping
                                                                              occupations or positions into occupational clusters.
5 U.S.C. §5104. Basis for grading positions                                   §9701.212. Bands. For purposes of identifying relative levels of work
Provides for 15 General Schedule pay grades. The statute defines each         and corresponding pay ranges, DHS may, after coordination with OPM,
of the pay grades in terms of their difficulty and responsibility.            establish one or more bands within each occupational cluster. Each
                                                                              occupational cluster may include, but is not limited to, the following
                                                                              bands: Entry/Developmental -- work that involves gaining the
                                                                              competencies needed to perform successfully in a Full Performance
                                                                              band through appropriate formal training and/or on-the-job experience.
                                                                              Full Performance -- work that involves the successful completion of
                                                                              any required entry-level training and/or developmental activities
                                                                              necessary to independently perform the full range of non-supervisory
                                                                              duties of a position in an occupational cluster.
                                                                              Senior Expert -- work that involves an extraordinary level of
                                                                          CRS-28

                  Current Law/Selected Regulations                                                     Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                                specialized knowledge or expertise upon which DHS relies for the
                                                                                accomplishment of critical mission goals and objectives; reserved for a
                                                                                limited number of non-supervisory employees.
                                                                                Supervisory -- work that may involve hiring or selecting employees,
                                                                                assigning work, managing performance, recognizing and rewarding
                                                                                employees, and other associated duties.
5 U.S.C. §5106. Basis for classifying positions                                 DHS must document in implementing directives the definitions for each
Each position is placed in its appropriate class on the basis of the duties     band which specify the type and range of difficulty and responsibility,
and responsibilities of the position and the qualifications required by         qualifications, competencies, or other characteristics of the work
those duties and responsibilities. Each class is placed in its appropriate      encompassed by the band.
grade on the basis of the level of difficulty, responsibility, and
qualification requirements of the work of the class.
5 U.S.C. §5105. Standards for classification of positions                       DHS must, after coordination with OPM, establish qualification
OPM , after consulting the agencies, prepares standards for placing             standards and requirements for each occupational cluster, occupational
positions in their proper classes and grades. OPM may make such                 series, and/or band. DHS may use the qualification standards
inquiries or investigations of the duties, responsibilities, and                established by OPM or, after coordination with OPM, may establish
qualification requirements of positions as it considers necessary for this      different qualification standards. Any DHS authority to establish
purpose. In the standards, OPM defines the various classes of positions         qualification standards or requirements under 5 U.S.C. Chapters 31 and
in terms of duties, responsibilities, and qualification requirements;           33 and OPM implementing regulations is not waived or modified.
establishes the official class titles; and sets forth the grades in which the
classes have been placed by OPM. OPM must revise, supplement, or
                                                                      CRS-29

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
abolish existing standards, or prepare new standards so that positions
will be covered by current published standards. The official class titles
are used for personnel, budget, and fiscal purposes.
5 U.S.C. §5107. Classification of positions
Except as otherwise provided in Chapter 51, each agency places each
position under its jurisdiction in its appropriate class and grade in
conformance with OPM standards. When facts warrant, an agency may
change a position from one class or grade to another.
                                                               Classification Process
5 U.S.C. §5104. Basis for grading positions                                 §9701.221. Classification requirements. DHS must develop a
Provides for 15 General Schedule pay grades. The statute defines each       methodology for describing and documenting the duties, qualifications,
of the pay grades in terms of their difficulty and responsibility.          and other requirements of categories of jobs, and DHS must make such
5 U.S.C. §5108. Classification of positions above GS-15                     descriptions and documentation available to affected employees.
Authorizes OPM to establish, and from time to time revise, the
maximum number of positions classified at any one time above GS-15,
and establish standards and procedures for classifying positions above
GS-15 for any executive agency.
5 U.S.C. 5113. Classification records
OPM may prescribe the form in which each agency must record the
duties and responsibilities of positions and the places where these
records must be maintained; examine these or other pertinent records of
the agency; and interview agency employees who have knowledge of
the duties and responsibilities of positions and information as to the
reasons for placing a position in a class or grade.
                                                                          CRS-30

                  Current Law/Selected Regulations                                                     Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
5 U.S.C. §5106. Basis for classifying positions                                 An authorized agency official must assign occupational series to jobs
Each position is placed in its appropriate class on the basis of the duties     consistent with definitions established by OPM or by DHS, after
and responsibilities of the position and the qualifications required by         coordination with OPM; and apply the criteria and definitions required
those duties and responsibilities. Each class is placed in its appropriate      by §9701.211 and §9701.212 to assign jobs to an appropriate
grade on the basis of the level of difficulty, responsibility, and              occupational cluster and band.
qualification requirements of the work of the class.
5 U.S.C. §5105. Standards for classification of positions                       DHS must establish procedures for classifying jobs and may make such
OPM , after consulting the agencies, prepares standards for placing             inquiries or investigations of the duties, responsibilities, and
positions in their proper classes and grades. OPM may make such                 qualification requirements of jobs as it considers necessary for the
inquiries or investigations of the duties, responsibilities, and                purposes of this section.
qualification requirements of positions as it considers necessary for this      Classification decisions become effective on the date designated by the
purpose. In the standards, OPM defines the various classes of positions         authorized agency official who makes the decision.
in terms of duties, responsibilities, and qualification requirements;
establishes the official class titles; and sets forth the grades in which the
classes have been placed by OPM. OPM must revise, supplement, or
abolish existing standards, or prepare new standards so that positions
will be covered by current published standards. The official class titles
are used for personnel, budget, and fiscal purposes.
5 U.S.C. §5111. Revocation and restoration of authority to classify             DHS must establish a plan to periodically review the accuracy of
positions                                                                       classification decisions.
When OPM finds that an agency is not placing positions in classes and
grades in conformance with or consistently with published standards, it
may revoke or suspend the authority granted to the agency under 5
U.S.C. §5107 and require that prior OPM approval be secured before an
action placing a position in a class and grade become effective. Agency
authority may be restored upon corrective action.
                                                                     CRS-31

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. §5110. Review of classification of positions                      §9701.222. Reconsideration of classification decisions. An
OPM, from time to time, reviews such number of positions in each           individual employee may request that DHS or OPM reconsider the pay
agency as will enable it to determine whether the agency is placing        system, occupational cluster, occupational series, or band assigned to
positions in classes and grades in conformance with or consistently with   his or her current official position of record at any time.
published standards. OPM takes corrective action when it finds that a      DHS will, after coordination with OPM, establish implementing
position is not placed in its proper class and grade in conformance with   directives for reviewing requests for reconsideration, including
published standards.                                                       nonreviewable issues, rights of representation, and the effective date of
5 U.S.C. §5112. General authority of OPM                                   any corrective actions. OPM will, after consulting with DHS, establish
OPM may place a position in the appropriate class and grade, determine     separate policies and procedures for reviewing reconsideration requests.
whether a position is in the appropriate class and grade, and change a     An employee may request that OPM review a DHS determination. If an
position from one class and grade to another when the facts as to the      employee does not request an OPM reconsideration decision, DHS's
duties, responsibilities, and qualification requirements of a position     classification determination is final and not subject to further review or
warrant. An employee may request that OPM exercise its authority in        appeal.
this regard.                                                               OPM's final determination on a request is not subject to further review
                                                                           or appeal.
                                                             Transitional Provisions
Authority derives from 5 U.S.C. §9701(a).                                  §9701.231. Conversion of positions and employees to the DHS
                                                                           classification system. Affected positions and employees may convert
                                                                           from the GS system, a prevailing rate system, the SL/ST system, or the
                                                                           SES system, as provided in §9701.202. The terms "convert,"
                                                                           "converted," "converting," and "conversion" refer to positions and
                                                                           employees that become covered by the classification system as a result
                                                                           of a coverage determination made under §9701.102(b) and exclude
                                                                           employees who are reassigned or transferred from a noncovered
                                                                           position to a position already covered by the DHS system.
                                                                           DHS will issue implementing directives prescribing policies and
                                                                       CRS-32

                 Current Law/Selected Regulations                                                   Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
                                                                           procedures for converting the GS or prevailing rate grade of a position
                                                                           to a band and for converting SL/ST and SES positions to a band upon
                                                                           initial implementation of the DHS classification system. Such
                                                                           procedures must include provisions for converting an employee who is
                                                                           retaining a grade under 5 U.S.C. Chapter 53, Subchapter VI,
                                                                           immediately prior to conversion. As provided in §9701.373, DHS must
                                                                           convert employees without a reduction in their rate of pay (including
                                                                           basic pay and any applicable locality payment, special rate, or other
                                                                           similar supplemental pay).
Authority derives from 5 U.S.C. §9701(a).                                  §9701.232. Special transition rules for Federal Air Marshal
P.L. 107-71 (115 Stat. 597) established the Transportation Security        Service. Notwithstanding any other provision in Subpart B, if DHS
Administration.                                                            transfers Federal Air Marshal Service (FAMS) positions from the TSA
                                                                           to another organization within DHS, DHS may cover those positions
                                                                           under a classification system that is parallel to the classification system
                                                                           that was applicable to the FAMS within TSA. DHS may, after
                                                                           coordination with OPM, modify that system. DHS will issue
                                                                           implementing directives on converting FAMS employees to any new
                                                                           classification system that may subsequently be established under
                                                                           Subpart B, consistent with the conversion rules in §9701.231.
                                                    Subpart C -- Pay and Pay Administration
                                                                       General
DHS Authority for Subpart C derives from 5 U.S.C. §9701(a)-(c).            §9701.301. Purpose. Subpart C contains regulations establishing pay
5 U.S.C. Chapter 53 -- Pay Rates and Systems                               structures and pay administration rules for covered DHS employees to
5 U.S.C. §5301. Policy                                                     replace the pay structures and pay administration rules established under
It is the policy of Congress that federal pay fixing for employees under   5 U.S.C. Chapter 53, as authorized by 5 U.S.C. §9701. These
                                                                     CRS-33

                 Current Law/Selected Regulations                                                Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
the General Schedule be based on the principles that there be equal pay   regulations are designed to provide DHS with the flexibility to allocate
for substantially equal work within each local pay area; within each      available funds strategically in support of DHS mission priorities and
local pay area, pay distinctions be maintained in keeping with work and   objectives. Various features that link pay to employees' performance
performance distinctions; federal pay rates be comparable with non-       ratings are designed to promote a high-performance culture within DHS.
federal pay rates for the same levels of work within the same local pay   Any pay system prescribed under Subpart C must be established in
area; and any existing pay disparities between federal and non-federal    conjunction with the classification system described in Subpart B.
employees should be completely eliminated.                                The pay system established under Subpart C, working in conjunction
                                                                          with the performance management system established under Subpart D,
                                                                          is designed to incorporate these features: adherence to merit principles
                                                                          set forth in 5 U.S.C. §2301; a fair, credible, and transparent employee
                                                                          performance appraisal system; a link between elements of the pay
                                                                          system established in Subpart C, the employee performance appraisal
                                                                          system, and the department's strategic plan; employee involvement in
                                                                          the design and implementation of the system (as specified in
                                                                          §9701.105); adequate training and retraining for supervisors, managers,
                                                                          and employees in the implementation and operation of the pay system;
                                                                          periodic performance feedback and dialogue among supervisors,
                                                                          managers, and employees throughout the appraisal period, and setting
                                                                          timetables for review; effective safeguards so that the management of
                                                                          the system is fair and equitable and based on employee performance;
                                                                          and a means for ensuring that adequate resources are allocated for the
                                                                          design, implementation, and administration of the performance
                                                                          management system that supports the pay system.
Authority derives from 5 U.S.C. §9701(a)-(c).                             §9701.302. Coverage. Subpart C applies to eligible DHS employees in
                                                                          the categories listed below, subject to a determination by the Secretary
                                                                          or designee under §9701.102(b).
                                                                   CRS-34

                 Current Law/Selected Regulations                                              Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. Chapter 53, Subchapter III -- General Schedule Pay Rates      Eligible for coverage are: employees who would otherwise be covered
5 U.S.C. Chapter 53, Subchapter IV -- Prevailing Rate Systems          by the GS pay system; employees who would otherwise be covered by a
5 U.S.C. §5376. Pay for certain senior-level positions                 prevailing rate system; employees in senior-level (SL) and scientific or
5 U.S.C. Chapter 53, Subchapter VIII -- Pay for the Senior Executive   professional (ST) positions who would otherwise be covered by 5
Service                                                                U.S.C. §5376; and SES members who would otherwise be covered by 5
                                                                       U.S.C. Chapter 53, Subchapter VIII, subject to §9701.102(d).
Authority derives from 5 U.S.C. §9701 (a)-(c).                         §9701.303. Waivers. When a specified category of employees is
                                                                       covered by the pay system established under Subpart C, the provisions
                                                                       of 5 U.S.C. Chapter 53, and related regulations, are waived with respect
                                                                       to that category of employees, except as provided in §9701.106, and
                                                                       below.
                                                                       Provisions of 5 U.S.C. Chapter 53 that are not waived are: Sections
5 U.S.C. §5307. Limitation on certain payments                         5307; 5311 through 5318; and 5377.
5 U.S.C. §§5311-5318. Executive Schedule Pay Rates
5 U.S.C. §5377. Pay authority for critical positions
5 U.S.C. §5371. Health care positions                                  The following provisions of 5 U.S.C. Chapter 53 also are not waived:
                                                                       Section 5371, insofar as it authorizes OPM to apply the provisions of 38
                                                                       U.S.C. Chapter 74 to DHS employees in health care positions covered
                                                                       by section 5371 in lieu of any DHS pay system established under
                                                                       Subpart C or Title 5 Chapters 51, 53, and 61, and Subchapter V of
                                                                       Chapter 55. The reference to "chapter 51" in section 5371 is deemed to
                                                                       include a classification system established under Subpart B.
5 U.S.C. §5373. Limitation on pay fixed by administrative action       Section 5373 is modified to raise the limit on rates of basic pay,
Generally, the limitation is Executive Schedule level IV.              including any applicable locality payment or supplement, for DHS
                                                                       employees who are not covered by Subpart C and whose pay is set by
                                                                      CRS-35

                Current Law/Selected Regulations                                                 Final DHS Regulations
                  Title 5 United States Code and
                Title 5 Code of Federal Regulations
                                                                         administrative action (e.g., Coast Guard Academy faculty) to the rate
                                                                         for level III of the Executive Schedule.
5 U.S.C. §5379. Student loan repayments                                  Section 5379 is modified to allow DHS, after coordination with OPM,
                                                                         to establish and administer a student loan repayment program for DHS
                                                                         employees, except that DHS may not make loan payments for any
                                                                         noncareer appointees to the SES or for any employee occupying a
                                                                         position that is excepted from the competitive service because of its
                                                                         confidential, policy-determining, policy-making, or policy-advocating
                                                                         character. Notwithstanding §9701.302(a), any DHS employee
                                                                         otherwise covered by section 5379 is eligible for coverage under the
                                                                         provisions established under this paragraph, subject to a determination
                                                                         by the Secretary or designee under §9701.102(b).
5 U.S.C. Chapter 53, Subchapter IV -- Prevailing Rate Systems            In approving the coverage of employees who would otherwise be
5 U.S.C. §5343. Prevailing rate determinations; wage schedules;          covered by a prevailing rate system, DHS may limit the waiver so that
night differentials                                                      affected employees remain entitled to environmental or other
(c)(4) environmental or other differentials for blue-collar workers      differentials established under 5 U.S.C. §5343(c)(4) and night shift
(f) night shift differentials for blue-collar workers                    differentials established under 5 U.S.C. §5343(f) if such employees are
                                                                         grouped in separate occupational clusters (established under Subpart B)
                                                                         that are limited to employees who would otherwise be covered by a
                                                                         prevailing rate system.
5 U.S.C. §5376. Pay for certain senior-level positions                   Employees in SL/ST positions and SES members who are covered by a
5 U.S.C. §5382. Establishment and adjustment of rates of pay for the     basic pay system established under Subpart C are considered to be paid
Senior Executive Service                                                 under 5 U.S.C. §§5376 and 5382, respectively, for the purpose of
5 U.S.C. §5307. Limitation on certain payments                           applying 5 U.S.C. §5307(d).
(d) For an employee who is paid under 5 U.S.C. 5376 or 5383 (setting
                                                                          CRS-36

                 Current Law/Selected Regulations                                                    Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
individual senior executive pay) or 28 U.S.C. 332(f) (judicial circuit
executives), 603 or 604 (Administrative Office of U.S. Courts) and who
holds a position in or under an agency which, for purposes of the
calendar year involved, has been certified as having a performance
appraisal system which (as designed and applied) makes meaningful
distinctions based on relative performance, the limitation would be the
Vice President's annual salary.
5 U.S.C. §5102. Definitions; application (unless otherwise noted)            §9701.304. Definitions. "48 contiguous States" means the States of
                                                                             the United States, excluding Alaska and Hawaii, but including the
                                                                             District of Columbia.
"Grade" includes all classes of positions which, although different with     "Band" means a work level or pay range within an occupational cluster.
respect to kind or subject-matter of work, are sufficiently equivalent as    "Band rate range" means the range of rates of basic pay (excluding any
to level of difficulty and responsibility; and level of qualification        locality or special rate supplements) applicable to employees in a
requirements of the work to warrant their inclusion within one range of      particular band, as described in §9701.321. Each band rate range is
rates of basic pay in the General Schedule.                                  defined by a minimum and maximum rate.
"Basic pay" means the total amount of pay received during any one            "Basic pay" means an employee's rate of pay before any deductions and
calendar year at the rate fixed by law or administrative action for the      exclusive of additional pay of any kind, except as expressly provided by
position held by an employee, including night and environmental              law or regulation. For the specific purposes prescribed in
differentials for prevailing rate employees, but before any deductions       §§9701.332(c) and 9701.333, respectively, basic pay includes locality
and exclusive of additional pay of any other kind. [5 CFR §530.202]          and special rate supplements.
                                                                             "Competencies" means the measurable or observable knowledge, skills,
                                                                             abilities, behaviors, and other characteristics required by a position.
"Demotion" means a change of an employee, while continuously                 "Demotion" means a reduction to a lower band within the same
employed, from one General Schedule (GS) grade to a lower GS grade,          occupational cluster or a reduction to a lower band in a different
                                                                       CRS-37

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
with or without reduction in pay; or a higher rate paid under authority    occupational cluster under implementing directives issued by DHS
other than 5 U.S.C. Chapter 53, Subchapter III, to a lower rate within a   pursuant to §9701.355.
GS grade. [5 CFR §531.202]
"Comparability payment" means a payment payable under 5 U.S.C.             "Locality rate supplement" means a geographic-based addition to basic
§5304 (locality-based comparability payments).                             pay, as described in §9701.332.
                                                                           "Modal rating" means the rating of record that occurs most frequently in
                                                                           a particular pay pool.
                                                                           "Occupational cluster" means a grouping of one or more associated or
                                                                           related occupations or positions. An occupational cluster may include
                                                                           one or more occupational series.
"Promotion" means a change of an employee, while continuously              "Promotion" means an increase to a higher band within the same
employed, from one General Schedule (GS) grade to a higher GS grade;       occupational cluster or an increase to a higher band in a different
or a lower rate paid under authority other than 5 U.S.C. Chapter 53,       occupational cluster under implementing directives issued by DHS
Subchapter III, to a higher rate within a GS grade. [5 CFR §531.202]       pursuant to §9701.355.
"Rating of record" means the performance rating prepared at the end of     "Rating of record" means a performance appraisal prepared at the end of
an appraisal period for performance of agency-assigned duties over the     an appraisal period covering an employee' performance of assigned
entire period and the assignment of a summary level within a pattern. [5   duties against performance expectations (as defined in §9701.404) over
CFR §430.203]                                                              the applicable period; or to support a pay determination, including one
                                                                           granted in accordance with Subpart C, a within-grade increase granted
                                                                           under 5 CFR §531.404, or a pay determination granted under other
                                                                           applicable rules.
Senior-level positions are positions that are classified above GS-15       "SL/ST" refers to an employee serving in a senior-level position paid
pursuant to 5 U.S.C. §5108; and scientific or professional positions       under 5 U.S.C. §5376. The term "SL" identifies a senior-level
                                                                      CRS-38

                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
established under 5 U.S.C. §3104. [5 U.S.C. §5376]                         employee covered by 5 U.S.C. §§3324 and 5108. The term "ST"
                                                                           identifies an employee who is appointed under the special authority in 5
                                                                           U.S.C. §3325 to a scientific or professional position under 5 U.S.C.
                                                                           §3104.
"Senior Executive Service position" means any position in an agency        "SES" means the Senior Executive Service established under 5 U.S.C.
that is classified above GS-15 pursuant to 5 U.S.C. §5108 or in level IV   Chapter 31, Subchapter II.
or V of the Executive Schedule, or an equivalent position, that is not
required to be filled by an appointment by the President by and with the
advice and consent of the Senate. Duties and responsibilities of
employees in such positions are listed. [5 U.S.C. §3132(a)(2)]
Special pay authority -- higher minimum rates of basic pay for one or      "Special rate supplement" means an addition to basic pay for a
more grades or levels, occupational groups, series, classes, or            particular category of employees to address staffing problems, as
subdivisions thereof. Locality-based comparability payments shall be       described in §9701.333. A special rate supplement is paid in place of
available to employees receiving special rates to such extent as the       any lesser locality rate supplement that would otherwise apply.
President (or designated agency) considers appropriate subject to pay
limitations. [5 U.S.C. §5305(a)(g)]
"Unacceptable performance" means performance of an employee that           "Unacceptable performance" means the failure to meet one or more
fails to meet established performance standards in one or more critical    performance expectations, as described in §9701.406.
elements of the employee's position. [5 U.S.C. §4301(3)]
Pay cannot be collectively bargained under Title 5                         §9701.305. Bar on collective bargaining. As provided in the
                                                                           definition of "conditions of employment" in §9701.504, any pay
                                                                           program established under authority of Subpart C is not subject to
                                                                           collective bargaining. This bar on collective bargaining applies to all
                                                                           aspects of the pay program, including but not limited to coverage
                                                                           decisions, the design of pay structures, the setting and adjustment of pay
                                                                     CRS-39

                 Current Law/Selected Regulations                                                 Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
                                                                          levels, pay administration rules and policies, and administrative
                                                                          procedures and arrangements.
                                                             Overview of Pay System
5 U.S.C. Chapter 53, Subchapter I -- Pay Comparability System             §9701.311. Major features. Through the issuance of implementing
5 U.S.C. §5303. Annual adjustments to pay schedules                       directives, DHS will establish a pay system that governs the setting and
5 U.S.C. §5304. Locality-based comparability payments                     adjusting of covered employees' rates of pay. The system will include a
5 U.S.C. §5305. Special pay authority                                     structure of rate ranges linked to various bands for each occupational
                                                                          cluster, in alignment with the classification structure described in
5 U.S.C. Chapter 53, Subchapter II. Executive Schedule Pay Rates          Subpart B; policies regarding the setting and adjusting of basic pay rate
5 U.S.C. Chapter 53, Subchapter IV. Prevailing Rate Systems (pay          ranges based on mission requirements, labor market conditions, and
setting for blue-collar workers)                                          other factors, as described in §§9701.321 through 9701.322;
5 U.S.C. Chapter 53, Subchapter VIII. Pay for the Senior Executive        policies regarding the setting and adjusting of supplements to basic pay
Service                                                                   based on local labor market conditions and other factors, as described in
                                                                          §§9701.331 through 9701.334; policies regarding employees' eligibility
                                                                          for pay increases based on adjustments in rate ranges and supplements,
                                                                          as described in §§9701.323 through §9701.325 and 9701.335 through
                                                                          §9701.337; policies regarding performance-based pay adjustments, as
                                                                          described in §§9701.341 through 9701.346;
                                                                          policies on basic pay administration, including movement between
                                                                          occupational clusters, as described in §§9701.351 through 9701.356;
                                                                          policies regarding special payments that are not basic pay, as described
                                                                          in §§9701.361 through 9701.363; and linkages to employees'
                                                                          performance ratings of records, as described in Subpart D.
5 U.S.C. §5307. Limitation on certain payments                            §9701.312. Maximum rates. DHS may not pay any employee an
No allowance, differential, bonus, award, or other similar cash payment   annual rate of basic pay in excess of the rate for level III of the
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                 Current Law/Selected Regulations                                                  Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
may be paid to an employee in a calendar year if, or to the extent that,   Executive Schedule, except that DHS may establish the maximum
when added to the total basic pay paid or payable to such employee         annual rate of basic pay for members of the SES at the rate for level II
would cause the total to exceed the annual rate of basic pay for           of the Executive Schedule if DHS obtains the certification specified in 5
Executive Schedule level I.                                                U.S.C. §5307(d).
For an employee who is paid under 5 U.S.C. 5376 or 5383 or 28 U.S.C.
332(f) (judicial circuit executives), 603 or 604 (Administrative Offices
of U.S. Courts) and who holds a position in or under an agency which,
for purposes of the calendar year involved, has been certified as having
a performance appraisal system which (as designed and applied) makes
meaningful distinctions based on relative performance, the limitation
would be the Vice President's annual salary.
Authority derives from 5 U.S.C. §9701(a).                                  §9701.313. Homeland Security Compensation Committee (HSCC).
                                                                           DHS will establish a HSCC to provide options and/or recommendations
                                                                           for consideration by the Secretary or designee on strategic
                                                                           compensation matters such as departmental compensation policies and
                                                                           principles, the annual allocation of funds between market and
                                                                           performance pay adjustments, and the annual adjustment of rate ranges
                                                                           and locality and special rate supplements. The committee will consider
                                                                           factors such as turnover, recruitment, and local labor market conditions
                                                                           in providing options and recommendations for consideration by the
                                                                           Secretary. The Secretary's or designee's determination with regard to
                                                                           these options and/or recommendations is final and not subject to further
                                                                           review.
                                                                           The DHS Undersecretary for Management will chair the committee.
                                                                           The committee has 14 members, including 4 officials of labor
                                                                           organizations granted national consultation rights (NCR). An OPM
                                                                           official will serve as an ex officio member of the committee. DHS will
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Current Law/Selected Regulations                                 Final DHS Regulations
  Title 5 United States Code and
Title 5 Code of Federal Regulations
                                         provide technical staff to support the committee.
                                         DHS will establish procedures governing the committee's membership
                                         and operation.
                                         An individual will be selected by the Chair to facilitate committee
                                         meetings. The facilitator will be selected from a list of nominees
                                         developed jointly by representatives of the department and NCR labor
                                         organizations, the latter acting as a single party, according to procedures
                                         and time limits established by implementing directives. Nominees must
                                         be known for their integrity, impartiality, and expertise in facilitation
                                         and compensation. If the department and the labor organizations are
                                         unable to reach agreement on a joint list of nominees, they will enlist
                                         the assistance of the Federal Mediation and Conciliation Service
                                         (FMCS). If the parties are still unable to reach agreement, each party
                                         will prepare a list of up to three nominees and provide those separate
                                         lists to FMCS who may add up to three additional nominees. From that
                                         combined list of nominees, the department and the labor organizations,
                                         the latter acting as a single party, will alternately strike names from the
                                         list until five names remain, and those five nominees will be submitted
                                         to the Chair for consideration. The Chair may request that the parties
                                         develop an additional list of nominees. If the NCR labor organizations
                                         representatives, acting as a single party, do not participate in developing
                                         the list of nominees in accordance with this section, the Chair will select
                                         the facilitator.
                                         After considering the views of all committee members, the Chair
                                         prepares and provides options and/or recommendations to the Secretary
                                         or designee. Members may present their views on the final
                                         recommendations in writing as part of the final recommendation
                                         package. The Secretary or designee will make the final decision and
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                  Current Law/Selected Regulations                                                     Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
                                                                              notify the committee. This process is not subject to the requirements
                                                                              established by §§9701.512, 9701.517(a)(5), 9701.518, or 9701.519.
                                                                              The Secretary retains the right to make determinations regarding the
                                                                              annual allocation of funds between market and performance pay
                                                                              adjustments, the annual adjustment of rate ranges and locality and
                                                                              special rate supplements, or any other matter recommended by the
                                                                              committee, and to make such determinations effective at any time.
Authority derives from 5 U.S.C. §9701(a).                                     §9701.314. DHS responsibilities. DHS responsibilities in
                                                                              implementing Subpart C include providing OPM with information
                                                                              regarding the implementation of the program authorized under Subpart
                                                                              C at OPM's request;
                                                                              participating in any interagency pay coordination council or group
                                                                              established by OPM to ensure that DHS pay policies and plans are
                                                                              coordinated with other agencies; and fulfilling all other responsibilities
                                                                              prescribed in Subpart C.
                                                           Setting and Adjusting Rate Ranges
5 U.S.C. §5104. Basis for grading positions                                   §9701.321. Structure of bands. After coordination with OPM, DHS
Provides for 15 General Schedule pay grades. The statute defines each         may establish ranges of basic pay for bands, with minimum and
of the pay grades in terms of their difficulty and responsibility.            maximum rates set and adjusted as provided in §9701.322. Rates must
                                                                              be expressed as annual rates.
                                                                              For each band within an occupational cluster, DHS will establish a
                                                                              common rate range that applies in all locations.
5 U.S.C. §5106. Basis for classifying positions                               §9701.322. Setting and adjusting rate ranges. Within its sole and
Each position is placed in its appropriate class on the basis of the duties   exclusive discretion, DHS may, after coordination with OPM, set and
and responsibilities of the position and the qualifications required by       adjust the rate ranges established under §9701.321 on an annual basis.
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                  Current Law/Selected Regulations                                                      Final DHS Regulations
                    Title 5 United States Code and
                  Title 5 Code of Federal Regulations
those duties and responsibilities. Each class is placed in its appropriate      In determining the rate ranges, DHS and OPM may consider mission
grade on the basis of the level of difficulty, responsibility, and              requirements, labor market conditions, availability of funds, pay
qualification requirements of the work of the class.                            adjustments received by employees of other federal agencies, and any
                                                                                other relevant factors.

5 U.S.C. §5105. Standards for classification of positions                       After coordination with OPM, DHS may determine the effective date of
OPM, after consulting the agencies, prepares standards for placing              newly set or adjusted band rate ranges. Unless DHS determines that a
positions in their proper classes and grades. OPM may make such                 different effective date is needed for operational reasons, these
inquiries or investigations of the duties, responsibilities, and                adjustments will become effective on or about the date of the annual GS
qualification requirements of positions as it considers necessary for this      pay adjustment.
purpose. In the standards, OPM defines the various classes of positions         DHS may establish different rate ranges and provide different rate range
in terms of duties, responsibilities, and qualification requirements;           adjustments for different bands.
establishes the official class titles; and sets forth the grades in which the   DHS may adjust the minimum and maximum rates of a band by
classes have been placed by OPM. OPM must revise, supplement, or                different percentages.
abolish existing standards, or prepare new standards so that positions
will be covered by current published standards. The official class titles
are used for personnel, budget, and fiscal purposes.
5 U.S.C. §5107. Classification of positions
Except as otherwise provided in Chapter 51, each agency places each
position under its jurisdiction in its appropriate class and grade in
conformance with OPM standards. When facts warrant, an agency may
change a position from one class or grade to another.
5 U.S.C. §5335. Periodic step-increases                                         §9701.323. Eligibility for pay increase associated with a rate range
5 U.S.C. §5336. Additional step-increases                                       adjustment. When a band rate range is adjusted under §9701.322,
Authorizes within-grade pay adjustments for work at an acceptable level         employees covered by that band are eligible for an individual pay
of competence (§5335) or for high quality performance above that                increase. An employee who meets or exceeds performance expectations
ordinarily found in the position (§5336).                                       (i.e., has a rating of record above the unacceptable performance level for
                                                                      CRS-44

                 Current Law/Selected Regulations                                                   Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. §5303. Annual adjustments to pay schedules                        the most recently completed appraisal period) must receive an increase
Authorizes annual pay adjustments. Effective as of the first day of the    in basic pay equal to the percentage value of any increase in the
first applicable pay period beginning on or after January 1 of each        minimum rate of the employee's band resulting from a rate range
calendar year, the rates of basic pay for each statutory pay system are    adjustment under §9701.322. The pay increase takes effect at the same
increased by the percentage equal to the Employment Cost Index for         time as the corresponding rate range adjustment, except as provided in
wages and salaries, private industry workers, minus 0.5%, i.e., the        §§9701.324 and 9701.325. For an employee receiving a retained rate,
September 2003 ECI is used for the January 2005 pay adjustment.            the amount of the increase is determined under §9701.356.
                                                                           If an employee does not have a rating of record for the most recently
                                                                           completed appraisal period, he or she must be treated in the same
                                                                           manner as an employee who meets or exceeds performance expectations
                                                                           and is entitled to receive an increase based on the rate range adjustment.
                                                                           An employee who has an unacceptable rating of record may not receive
                                                                           a pay increase as a result of a rate range adjustment, except as provided
                                                                           by §§9701.324 and 9701.325. Because the employee's pay remains
                                                                           unchanged, failure to receive a pay increase is not considered an adverse
                                                                           action under Subpart F.
5 CFR §430.208 Rating performance. (i) A rating or record may be           §9701.324. Treatment of employees whose rate of basic pay does
changed within 60 days of issuance based upon an informal request by       not fall below the minimum rate of their band. An employee who
the employee; as a result of a grievance, complaint, or other formal       does not receive a pay increase under §9701.323 because of an
proceeding permitted by law or regulation that results in a final          unacceptable rating of record and whose rate of basic pay does not fall
determination by appropriate authority that the rating of record must be   below the minimum rate of his or her band as a result of that rating will
changed or as part of a bona fide settlement of a formal proceeding; or    receive such an increase if he or she demonstrates performance that
where the agency determines that a rating of record was incorrectly        meets or exceeds performance expectations, as reflected by a new rating
recorded or calculated.                                                    of record issued under §9701.409(b). Such an increase will be made
5 CFR §531.409 Acceptable level of competence determinations (the          effective on the first day of the first pay period beginning on or after the
section generally and specifically:)                                       date the new rating of record is issued.
(c)(2)(i) When the determination of an acceptable level of competence
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                 Current Law/Selected Regulations                                                   Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
has been delayed for reasons including an employee's unacceptable
performance, if, following the delay, the employee's performance is
determined to be at an acceptable level of competence, the within-grade
increase will be granted retroactively to the beginning of the pay period
following completion of the applicable waiting period.
See 5 CFR §430.208 and 5 CFR §531.409 above.                                §9701.325. Treatment of employees whose rate of basic pay falls
                                                                            below the minimum rate of their band. For an employee who does
                                                                            not receive a pay increase under §9701.323 because of an unacceptable
                                                                            rating of record and whose rate of basic pay falls below the minimum
                                                                            rate of his or her band as a result of that rating, DHS must issue a new
                                                                            rating of record under §9701.409(b) and adjust the employee's pay
                                                                            prospectively by making the increase effective on the first day of the
                                                                            first pay period beginning on or after the date the new rating of record is
                                                                            issued if the employee demonstrates performance that meets or exceeds
                                                                            performance expectations within 90 days after the date of the rate range
                                                                            adjustment; or
                                                                            initiate action within 90 days after the date of the rate range adjustment
                                                                            to demote or remove the employee in accordance with the adverse
                                                                            actions procedures established in Subpart F.
                                                                            If DHS fails to initiate a removal or demotion action within 90 days
                                                                            after the date of the rate range adjustment, the employee becomes
                                                                            entitled to the minimum rate of his or her band rate range on the first
                                                                            day of the first pay period beginning on or after the 90th day following
                                                                            the date of the rate range adjustment.
                                                       Locality and Special Rate Supplements
                                                                   CRS-46

                 Current Law/Selected Regulations                                               Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
5 U.S.C. §5304. Locality-based comparability payments                   §9701.331. General. The basic pay ranges established under
5 U.S.C. §5305. Special pay authority                                   §§9701.321 through 9701.323 may be supplemented in appropriate
                                                                        circumstances by locality or special rate supplements, as described in
                                                                        §§9701.332 through 9701.335. These supplements are expressed as a
                                                                        percentage of basic pay and are set and adjusted as described in
                                                                        §9701.334. As authorized by §9701.356, DHS implementing directives
                                                                        will determine the extent to which §§9701.331 through 9701.337 apply
                                                                        to employees receiving a retained rate.
5 U.S.C. §5304. Locality-based comparability payments                   §9701.332. Locality rate supplements. For each band rate range,
Comparability payments are payable within each locality determined to   DHS may, after coordination with OPM, establish locality rate
have a pay disparity greater than 5%.                                   supplements that apply in specified locality pay areas. Locality rate
                                                                        supplements apply to employees whose official duty station is located in
                                                                        the given area. DHS may provide different locality rate supplements for
                                                                        different occupational clusters or for different bands within the same
                                                                        occupational cluster in the same locality pay area.
Locality pay areas are listed at 5 CFR §531.603.                        For the purpose of establishing and modifying locality pay areas, 5
                                                                        U.S.C. §5304 is not waived. A DHS decision to use the locality pay
                                                                        area boundaries established under 5 U.S.C. §5304 does not require
                                                                        separate DHS regulations. DHS may, after coordination with OPM and
                                                                        in accordance with the public notice and comment provisions of 5
                                                                        U.S.C. §553, publish departmental regulations in the Federal Register
5 U.S.C. §553. Rule making                                              that establish and adjust different locality pay areas within the 48
                                                                        contiguous States or establish and adjust new locality pay areas outside
                                                                        the 48 contiguous States. These regulations are subject to the
                                                                        continuing collaboration process described in §9701.105. As provided
                                                                        by 5 U.S.C. §5304(f)(2)(B), judicial review of any DHS regulation
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                 Current Law/Selected Regulations                                                    Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
                                                                             regarding the establishment or adjustment of locality pay areas is
                                                                             limited to whether or not the regulation was promulgated in accordance
                                                                             with 5 U.S.C. §553.
Locality payments are part of basic pay for purposes of retirement, life     Locality rate supplements are considered basic pay for retirement; life
insurance, premium pay, and for such other purposes as may be                insurance; premium pay; severance pay; application of the maximum
expressly provided for by law or as OPM regulations may prescribe.           rate limitation set forth in §9701.312; determining the rate of basic pay
                                                                             upon conversion to the DHS pay system established under Subpart C,
                                                                             consistent with §9701.373(b); other payments and adjustments
                                                                             authorized under Subpart C as specified by DHS implementing
                                                                             directives; other payments and adjustments under other statutory or
                                                                             regulatory authority that are basic pay for the purpose of locality-based
                                                                             comparability payments; and any provisions for which DHS locality
                                                                             rate supplements must be treated as basic pay by law.
5 U.S.C. §5305. Special pay authority                                        §9701.333. Special rate supplements. DHS will, after coordination
Whenever the President finds that the government's recruitment or            with OPM, establish special rate supplements that provide higher pay
retention efforts with respect to one or more occupations in one or more     levels for subcategories of employees within an occupational cluster if
areas or locations are, or are likely to become significantly handicapped    DHS determines that such supplements are warranted by current or
due to specific circumstances, he may establish for the areas or locations   anticipated recruitment and/or retention needs. DHS will issue
involved higher minimum rates of basic pay for one or more grades or         necessary implementing directives. Any special rate supplement must
levels, occupational groups, series, classes, or subdivisions thereof, and   be treated as basic pay for the same purposes as locality rate
may make corresponding increases in all step rates of the pay range for      supplements, as described in §9701.332(c), and for the purpose of
each such grade or level. Circumstances justifying special rates are         computing cost-of-living allowances and post differentials in nonforeign
rates of pay offered by non-federal employees being significantly higher     areas under 5 U.S.C. §5941.
than those payable by the government within the area, location,
occupational group, or classes of positions under the pay system
involved; the remoteness of the area or location; the undesirability of
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                 Current Law/Selected Regulations                                                 Final DHS Regulations
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                 Title 5 Code of Federal Regulations
the working conditions or the nature of the work involved (including
exposure to toxic substances or other occupational hazards); or any
other circumstances which the President (or an agency) considers
appropriate.
5 U.S.C. §5304. Locality-based comparability payments                     §9701.334. Setting and adjusting locality and special rate
Authorizes the President to direct the Pay Agent to prepare a report      supplements. Within its sole and exclusive discretion, DHS may, after
comparing General Schedule pay rates with non-federal pay rates, as       coordination with OPM, set and adjust locality and special rate
determined by surveys conducted by the Bureau of Labor Statistics.        supplements. In determining the amounts of the supplements, DHS and
Based on the data from the surveys, the Pay Agent identifies each         OPM may consider mission requirements, labor market conditions,
locality in which a pay disparity exists, specifies the size of the pay   availability of funds, pay adjustments received by employees of other
disparity, and makes recommendations to the President for appropriate     federal agencies, and any other relevant factors.
comparability payments. Comparability payments are paid in the same       DHS may, after coordination with OPM, determine the effective date of
manner and at the same time as basic pay is payable.                      newly set or adjusted locality and special rate supplements. Established
5 U.S.C. §5304a. Authority to fix an alternative level of                 supplements will be reviewed for possible adjustment on an annual
comparability payments                                                    basis in conjunction with rate range adjustments under §9701.322.
Authorizes the President to fix an alternative level of locality-based
comparability payments if, because of national emergency or serious
economic conditions affecting the general welfare, he considers the
level that would otherwise be payable to be inappropriate. At least one
month before those comparability payments would be payable he must
prepare and transmit to Congress a report describing the alternative
level of payments he intends to provide, including the reasons why that
alternative level is necessary.
5 U.S.C. §5305. Special pay authority
A minimum rate may not exceed the maximum pay rate prescribed by
statute for the grade or level by more than 30% and no rate may be
established in excess of basic pay for Executive Schedule level V.
                                                                      CRS-49

                 Current Law/Selected Regulations                                                    Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
Generally, Title 5 rewards high performing employees through awards.        §9701.335. Eligibility for pay increase associated with a supplement
5 U.S.C. §4505a. Performance-based cash awards                              adjustment. When a locality or special rate supplement is adjusted
An employee whose most recent performance rating was fully                  under §9701.334, an employee to whom the supplement applies is
successful or higher may be paid a cash award equal to an amount            entitled to the pay increase resulting from that adjustment if he or she
determined appropriate by the agency head, but not more than 10% of         meets or exceeds performance expectations (i.e., has a rating of record
the employee's annual pay rate (not more than 20% for exceptional           above the unacceptable performance level for the most recently
performance.                                                                completed appraisal period). This includes an increase resulting from
5 U.S.C. §4503. Agency awards                                               the initial establishment and setting of a special rate supplement. The
Authorizes an agency head to pay a cash award to an employee who            pay increase takes effect at the same time as the applicable supplement
contributes to the efficiency, economy, or other improvement of             is set or adjusted, except as provided in §§9701.336 and 9701.337.
government operations or achieves a significant reduction in paperwork;     If an employee does not have a rating of record for the most recently
or performs a special act or service in the public interest in connection   completed appraisal period, he or she must be treated in the same
with or related to official employment.                                     manner as an employee who meets or exceeds performance expectations
5 U.S.C. §4504. Presidential awards                                         and is entitled to any pay increase associated with a supplement
Authorizes the President to pay a cash award to an employee who             adjustment.
contributes to the efficiency, economy, or other improvement of             An employee who has an unacceptable rating of record may not receive
government operations or achieves a significant reduction in paperwork;     a pay increase as a result of an increase in an applicable locality or
or performs an exceptionally meritorious special act or service in the      special rate supplement, except as provided by §§9701.336 and
public interest in connection with or related to official employment.       9701.337. Because the employee's pay remains unchanged, failure to
                                                                            receive a pay increase is not considered an adverse action under Subpart
                                                                            F.
5 CFR §430.208 Rating performance. (i) A rating or record may be            §9701.336. Treatment of employees whose pay does not fall below
changed within 60 days of issuance based upon an informal request by        the minimum adjusted rate of their band. An employee who does
the employee; as a result of a grievance, complaint, or other formal        not receive a pay increase under §9701.335 because of an unacceptable
proceeding permitted by law or regulation that results in a final           rating of record and whose rate of basic pay (including a locality or
determination by appropriate authority that the rating of record must be    special rate supplement) does not fall below the minimum adjusted rate
changed or as part of a bona fide settlement of a formal proceeding; or     of his or her band as a result of that rating will receive such an increase
                                                                      CRS-50

                 Current Law/Selected Regulations                                                    Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
where the agency determines that a rating of record was incorrectly         if he or she demonstrates performance that meets or exceeds
recorded or calculated.                                                     performance expectations, as reflected by a new rating of record issued
5 CFR §531.409 Acceptable level of competence determinations (the           under §9701.409(b). Such an increase will be made effective on the
section generally and specifically:)                                        first day of the first pay period beginning on or after the date the new
(c)(2)(i) When the determination of an acceptable level of competence       rating of record is issued.
has been delayed for reasons including an employee's unacceptable
performance, if, following the delay, the employee's performance is
determined to be at an acceptable level of competence, the within-grade
increase will be granted retroactively to the beginning of the pay period
following completion of the applicable waiting period.
See 5 CFR §430.208 and 5 CFR §531.409 (c) above.                            §9701.337. Treatment of employees whose rate of pay falls below
                                                                            the minimum adjusted rate of their band. For an employee who does
                                                                            not receive a pay increase under §9701.335 because of an unacceptable
                                                                            rating of record and whose rate of basic pay (including a locality or
                                                                            special rate supplement) falls below the minimum adjusted rate of his or
                                                                            her band as a result of that rating, DHS must issue a new rating of
                                                                            record under §9701.409(b) and adjust the employee's pay prospectively
                                                                            by making the increase effective on the first day of the first pay period
                                                                            beginning on or after the date the new rating of record is issued if the
                                                                            employee demonstrates performance that meets or exceeds performance
                                                                            expectations within 90 days after the date of the locality or special rate
                                                                            supplement adjustment; or
                                                                            initiate action within 90 days after the date of the locality or special rate
                                                                            supplement adjustment to demote or remove the employee in
                                                                            accordance with the adverse action procedures established in Subpart F.
                                                                            If DHS fails to initiate a removal or demotion action within 90 days
                                                                            after the date of a locality or special rate supplement adjustment, the
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                 Current Law/Selected Regulations                                                 Final DHS Regulations
                   Title 5 United States Code and
                 Title 5 Code of Federal Regulations
                                                                          employee becomes entitled to the minimum adjusted rate of his or her
                                                                          band rate range on the first day of the first pay period beginning on or
                                                                          after the 90th day following the date of the locality or special rate
                                                                          supplement adjustment.
                                                            Performance-Based Pay
5 U.S.C. §5335. Periodic step-increases                                   §9701.341. General. Sections 9701.342 through 9701.346 describe
5 U.S.C. §5336. Additional step-increases                                 various types of performance-based pay adjustments that are part of the
                                                                          pay system established under Subpart C. Generally, these within-band
5 U.S.C. §4505a. Performance-based cash awards                            pay increases are directly linked to an employee's rating of record (as
5 U.S.C. §4503. Agency awards                                             assigned under the performance management system described in
5 U.S.C. §4504. Presidential awards                                       Subpart D). These provisions are designed to provide DHS with the
                                                                          flexibility to allocate available funds based on performance as a means
                                                                          of fostering a high-performance culture that supports mission
                                                                          accomplishment. While performance measures primarily focus on an
                                                                          employee's contributions (as an individual or as part of a team) in
                                                                          accomplishing work assignments and achieving mission results,
                                                                          performance also may be reflected in the acquisition and demonstration
                                                                          of required competencies.
5 U.S.C. §4505a. Performance-based cash awards                            §9701.342. Performance pay increases. Overview. The DHS pay
An employee whose most recent performance rating was "fully               system provides employees in a Full Performance or higher band with
successful" or higher may be paid a cash award.                           increases in basic pay based on individual performance ratings of record
                                                                          as assigned under a performance management system established under
5 U.S.C. §5335. Periodic step-increases                                   Subpart D. The DHS pay system uses pay pool controls to allocate pay
5 U.S.C. §5336. Additional step-increases                                 increases based on performance points that are directly linked to the
Authorizes within-grade pay adjustments for work at an acceptable level   employee's rating of record, as described in this section. Performance
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                Current Law/Selected Regulations                                              Final DHS Regulations
                  Title 5 United States Code and
                Title 5 Code of Federal Regulations
of competence (§5335) or for high quality performance above that      pay increases are a function of the amount of money in the performance
ordinarily found in the position (§5336).                             pay pool, the relative point value placed on ratings, and the distribution
                                                                      of ratings within that performance pay pool.
                                                                      The rating of record used as the basis for a performance pay increase is
                                                                      the one assigned for the most recently completed appraisal period
                                                                      (subject to the requirements of Subpart D), except that if the supervisor
                                                                      or other rating official determines that an employee's current
                                                                      performance is inconsistent with that rating, the supervisor or other
                                                                      rating official may prepare a more current rating of record, consistent
                                                                      with §9701.409(b). If an employee does not have a rating of record,
                                                                      DHS will use the modal rating received by other employees covered by
                                                                      the same pay pool during the most recent rating cycle to determine the
                                                                      employee's performance pay increase.
                                                                      Performance pay pools. DHS will establish pay pools for performance
                                                                      pay increases. Each pay pool covers a defined group of DHS
                                                                      employees, as determined by the agency. An authorized agency
                                                                      official(s) may determine the distribution of funds among pay pools and
                                                                      may adjust those amounts based on overall levels of organizational
                                                                      performance or contribution to DHS' mission. In allocating the monies
                                                                      to be budgeted for performance pay increases, the Secretary or designee
                                                                      must take into account the average value of within-grade and quality
                                                                      step increases under the General Schedule, as well as amounts that
                                                                      otherwise would have been spent on promotions among positions placed
                                                                      in the same band.
                                                                      Performance point values. DHS will establish point values that
                                                                      correspond to the performance rating levels established under Subpart
                                                                      D, so that a point value is attached to each rating level. For example, in
                                                                      a four-level rating program, the point value pattern could be 4-2-1-0,
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                                         where 4 points are assigned to the highest (outstanding) rating and 0
                                         points to an unacceptable rating. Performance point values will
                                         determine performance pay increases. DHS will establish a point value
                                         pattern for each pay pool. Different pay pools may have different point
                                         value patterns. DHS must assign zero performance points to an
                                         unacceptable rating of record.
                                         Performance payout. DHS will determine the value of a performance
                                         point, expressed as a percentage of an employee's rate of basic pay
                                         (exclusive of locality or special rate supplements under §§9701.332 and
                                         9701.333) or as a fixed dollar amount. To determine an individual
                                         employee's performance payout, DHS will multiply the point value
                                         determined above by the number of performance points assigned to the
                                         rating. To the extent that the adjustment does not cause the employee's
                                         rate of basic pay to exceed the maximum rate of the employee's band
                                         rate range, DHS will pay the performance payout as an adjustment in
                                         the employee's annual rate of basic pay. Any excess amount may be
                                         granted as a lump-sum payment, which may not be considered basic pay
                                         for any purpose. DHS may, after coordination with OPM, determine
                                         the effective date of adjustments in basic pay.
                                         For an employee receiving a retained rate under §9701.356, DHS will
                                         issue implementing directives to provide for granting a lump-sum
                                         performance payout that may not exceed the amount that may be
                                         received by an employee in the same pay pool with the same rating of
                                         record whose rate of pay is at the maximum rate of the same band.
                                         Proration of performance payouts. DHS will issue implementing
                                         directives regarding the proration of performance payouts for employees
                                         who, during the period between performance pay adjustments, are hired
                                         or promoted; in a leave-without-pay status; or in other circumstances
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                                         where proration is considered appropriate.
                                         Adjustments for employees returning after performing honorable
                                         service in the uniformed services. DHS will issue implementing
                                         directives regarding how it sets the rate of basic pay prospectively for an
                                         employee who leaves a DHS position to perform service in the
                                         uniformed services (as defined in 38 U.S.C. §4303 and 5 CFR
                                         §353.102) and returns through the exercise of a reemployment right
                                         provided by law, Executive order, or regulation under which accrual of
                                         service for seniority-related benefits is protected (e.g., 38 U.S.C.
                                         §4316). DHS will credit the employee with intervening rate range
                                         adjustments under §9701.323(a), as well as developmental pay
                                         adjustments under §9701.345 (determined by DHS in accordance with
                                         its implementing directives), and performance pay adjustments based on
                                         the employee's last DHS rating of record. For employees who have no
                                         such rating of record, DHS will use the modal rating received by other
                                         employees covered by the same pay pool during the most recent rating
                                         cycle. An employee returning from qualifying service in the uniformed
                                         services will receive the full amount of the performance pay increase
                                         associated with his or her rating of record.
                                         Adjustments for employees returning to duty after being in workers'
                                         compensation status. DHS will issue implementing directives regarding
                                         how it sets the rate of basic pay prospectively for an employee who
                                         returns to duty after a period of receiving injury compensation under 5
                                         U.S.C. Chapter 81, Subchapter I (in a leave-without-pay status or as a
                                         separated employee). DHS will credit the employee with intervening
                                         rate range adjustments under §9701.323(a), as well as developmental
                                         pay adjustments under §9701.345 (as determined by DHS in accordance
                                         with its implementing directives), and performance pay adjustments
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                 Title 5 Code of Federal Regulations
                                                                         based on the employee's last DHS rating of record. For employees who
                                                                         have no such rating of record, DHS will use the modal rating received
                                                                         by other employees covered by the same pay pool during the most
                                                                         recent rating cycle. An employee returning to duty after receiving
                                                                         injury compensation will receive the full amount of the performance pay
                                                                         increase associated with his or her rating of record.
5 U.S.C. §4303. Actions based on unacceptable performance                §9701.343. Within-band reductions. Subject to the adverse action
Authorizes an agency to reduce in grade or remove an employee for        procedures set forth in Subpart F, DHS may reduce an employee's rate
unacceptable performance.                                                of basic pay within a band for unacceptable performance or conduct. A
                                                                         reduction under this section may not be more than 10% or cause an
                                                                         employee's rate of basic pay to fall below the minimum rate of the
                                                                         employee's band rate range. Such a reduction may be made effective at
                                                                         any time.
5 U.S.C. §5377. Pay authority for critical positions                     §9701.344. Special within-band increases. DHS may issue
Authorizes OMB, in consultation with OPM, to, upon the request of an     implementing directives regarding special within-band basic pay
agency head, grant authority to fix the basic pay rate for one or more   increases for employees within a Full Performance or higher band
positions in the agency in accordance with critical pay. OMB may not     established under §9701.212 who possess exceptional skills in critical
authorize the exercise of critical pay authority for more than 800       areas or who make exceptional contributions to mission
positions at any time, of which not more than 30 may at any time be      accomplishment or in other circumstances determined by DHS.
positions which would otherwise be paid on the Executive Schedule.       Increases under this section are in addition to any performance pay
                                                                         increases made under §9701.342 and may be made effective at any
                                                                         time. Special within-band increases may not be based on length of
                                                                         service.
5 U.S.C. §5335. Periodic step-increases                                  §9701.345. Developmental pay adjustments. DHS will issue
5 U.S.C. §5336. Additional step-increases                                implementing directives regarding pay adjustments within the
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                 Title 5 Code of Federal Regulations
Authorizes within-grade pay adjustments for work at an acceptable level    Entry/Developmental band. These directives may require employees to
of competence (§5335) or for high quality performance above that           meet certain standardized assessment or certification points as part of a
ordinarily found in the position (§5336).                                  formal training/developmental program. In administering
                                                                           Entry/Developmental band pay progression plans, DHS may link pay
                                                                           progression to the demonstration of required knowledge, skills, and
                                                                           abilities (KSAs)/competencies. DHS may set standard timeframes for
                                                                           progression through an Entry/Developmental band while allowing an
                                                                           employee to progress at a slower or faster rate based on his or her
                                                                           performance, demonstration of required competencies, and/or other
                                                                           factors.
5 U.S.C. §3393. Career appointments (SES)                                  §9701.346. Pay progression for new supervisors. DHS will issue
OPM administers the Federal Candidate Development Program to train         implementing directives requiring an employee newly appointed to or
career employees for SES positions. Upon certification by a                selected for a supervisory position to meet certain assessment or
performance review board that an employee has met the five executive       certification points as part of a formal training/developmental program.
core qualifications for the SES, he or she may be selected for an SES      In administering performance pay increases for these employees under
position throughout the government.                                        §9701.342, DHS may take into account the employee's success in
                                                                           completing a formal training/developmental program, as well as his or
                                                                           her performance.
                                                                Pay Administration
5 U.S.C. §5333. Minimum rate for new appointments                          §9701.351. Setting an employee's starting pay. DHS will, after
New appointments are made at the minimum rate of the appropriate           coordination with OPM, issue implementing directives regarding the
grade. Appointments at above the minimum rate may be made for such         starting rate of pay for an employee, including an individual who is
considerations as the existing pay or unusually high or unique             newly appointed or reappointed to the federal service; an employee
qualifications of the candidate, or a special need of the government for   transferring to DHS from another Federal agency; and a DHS employee
the individual's services.                                                 who moves from a noncovered position to a position already covered by
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                                                                              Subpart C.
5 CFR §531.203 General provisions. Discusses use of the highest               §9701.352. Use of highest previous rate. DHS will issue
previous rate, especially at (c)-(e). "Highest previous rate" means the       implementing directives regarding the discretionary use of an
highest actual rate of basic pay previously received by an individual         individual's highest previous rate of basic pay received as a federal
while employed in a position in a branch of the federal government            employee or as an employee of a Coast Guard nonappropriated fund
(executive, legislative, or judicial); a government corporation; the          instrumentality (NAFI) in setting pay upon reemployment, transfer,
United States Postal Service or the Postal Rate Commission; or the            reassignment, promotion, demotion, placement in a different
government of the District of Columbia; without regard to whether the         occupational cluster, or change in type of appointment. For this
position was subject to the General Schedule (GS); or the actual rate of      purpose, basic pay may include a locality-based payment or supplement
basic pay for the highest grade and step previously held by an individual     under circumstances approved by DHS. If an employee in a Coast
while employed in a position subject to the GS. [5 CFR 531.202]               Guard NAFI position is converted to an appropriated fund position
                                                                              under the pay system established under Subpart C, DHS must use the
                                                                              existing NAFI rate to set pay upon conversion.
5 U.S.C. §5334. Rate on change of position or type of appointment;            §9701.353. Setting pay upon promotion. Except as otherwise
regulations                                                                   provided in this section, upon an employee's promotion, DHS must
(b) Generally, an employee who is promoted or transferred to a position       provide an increase in the employee's rate of basic pay equal to at least
in a higher grade is entitled to basic pay at the lowest rate of the higher   8%. The rate of basic pay after promotion may not be less than the
grade which exceeds his existing rate of basic pay by not less than two       minimum rate of the higher band.
step-increases of the grade from which he is promoted or transferred.         DHS will issue implementing directives providing for an increase other
Regulations are at 5 CFR §531.203 and 5 CFR §531.204.                         than the amount specified above in the case of an employee promoted
                                                                              from an Entry/Developmental band to a Full Performance band
                                                                              (consistent with the pay progression plan established for the
                                                                              Entry/Developmental band); an employee who was demoted and is then
                                                                              repromoted back to the higher band; or employees in other
                                                                              circumstances specified by DHS implementing directives.
                                                                              An employee receiving a retained rate (i.e., a rate above the maximum
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                 Current Law/Selected Regulations                                                   Final DHS Regulations
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                 Title 5 Code of Federal Regulations
                                                                            of the band) before promotion is entitled to a rate of basic pay after
                                                                            promotion that is at least 8% higher than the maximum rate of the
                                                                            employee's current band (except in circumstances specified by DHS
                                                                            implementing directives). The rate of basic pay after promotion may
                                                                            not be less than the minimum rate of the employee's new band rate
                                                                            range or the employee's existing retained rate of basic pay. If the
                                                                            maximum rate of the employee's new band rate range is less than the
                                                                            employee's existing rate of basic pay, the employee will continue to be
                                                                            entitled to the existing rate as a retained rate.
                                                                            DHS may determine the circumstances under which and the extent to
                                                                            which any locality or special rate supplements are treated as basic pay in
                                                                            applying the promotion increase rules in this section.
5 U.S.C. §5334. Rate on change of position or type of appointment;          §9701.354. Setting pay upon demotion. DHS will issue
regulations                                                                 implementing directives regarding how to set an employee's pay when
(a) The rate of basic pay to which an employee is entitled is governed      he or she is demoted. The directives must distinguish between
by OPM regulations in conformity with Subchapter III of Chapter 53          demotions under adverse action procedures (as defined in Subpart F)
and Chapter 51 when he is ... demoted to a position in a lower grade ....   and other demotions (e.g., due to expiration of a temporary promotion
The regulations are at [5 CFR §531.203(c)(d)].                              or canceling of a promotion during a new supervisor's probationary
                                                                            period). A reduction in basic pay upon demotion under adverse action
                                                                            procedures may not exceed 10% unless a larger reduction is needed to
                                                                            place the employee at the maximum rate of the lower band.
See 5 U.S.C. §5334(a)(b) above.                                             §9701.355. Setting pay upon movement to a different occupational
                                                                            cluster. DHS will issue implementing directives regarding how to set
                                                                            an employee's pay when he or she moves voluntarily or involuntarily to
                                                                            a position in a different occupational cluster, including rules for
                                                                            determining whether such a movement is to a higher or lower band for
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                 Current Law/Selected Regulations                                                    Final DHS Regulations
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                 Title 5 Code of Federal Regulations
                                                                             the purpose of setting pay upon promotion or demotion under
                                                                             §§9701.353 and 9701.354, respectively.
5 U.S.C. Chapter 53, Subchapter VI -- Grade and Pay Retention                §9701.356. Pay retention. Subject to the requirements of this section,
5 U.S.C. §5362. Grade retention following a change of positions or           DHS will, after coordination with OPM, issue implementing directives
reclassification                                                             regarding the application of pay retention. Pay retention prevents a
Generally, an employee whose position changes to one in a lower grade        reduction in basic pay that would otherwise occur by preserving the
is entitled to retain the higher grade for two years. Certain requirements   former rate of basic pay within the employee's new band or by
stated in the law must be met for grade retention to occur.                  establishing a retained rate that exceeds the maximum rate of the new
5 U.S.C. §5363. Pay retention                                                band.
Generally, entitles an employee to basic pay at a rate equal to the          Pay retention must be based on the employee's rate of basic pay in
employee's allowable former rate of basic pay, plus 50% of the amount        effect immediately before the action that would otherwise reduce the
of each increase in the maximum rate of basic pay payable for the grade      employee's rate. A retained rate must be compared to the range of rates
of the employee's position immediately after such reduction in pay if        of basic pay applicable to the employee's position.
such allowable former rate exceeds such maximum rate for the grade.          In applying §9701.323 (regarding pay increases provided at the time of
Certain requirements for pay retention are stated in the law.                a rate range adjustment under §9701.322), any increase in the rate of
                                                                             basic pay for an employee receiving a retained rate is equal to one-half
                                                                             of the percentage value of any increase in the minimum rate of the
                                                                             employee's band.
5 U.S.C. §5333. Minimum rate for new appointments                            §9701.357. Miscellaneous. Except in the case of an employee who
New appointments are made at the minimum rate of the appropriate             does not receive a pay increase under §§9701.323 or 9701.335 because
grade. Appointments at above the minimum rate may be made for such           of an unacceptable rating of record, an employee's rate of basic pay may
considerations as the existing pay or unusually high or unique               not be less than the minimum rate of the employee's band (or the
qualifications of the candidate, or a special need of the government for     adjusted minimum rate of that band).
the individual's services.                                                   Except as provided in §9701.356, an employee's rate of basic pay may
                                                                             not exceed the maximum rate of the employees' band rate range.
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                Title 5 Code of Federal Regulations
5 U.S.C. §5504. Biweekly pay periods; computation of pay                 DHS must follow the rules for establishing pay periods and computing
5 U.S.C. §5505. Monthly pay periods; computation of pay                  rates of pay in 5 U.S.C. §§5504 and 5505, as applicable. For employees
                                                                         covered by 5 U.S.C. §5504, annual rates of pay must be converted to
                                                                         hourly rates of pay in computing payments received by covered
                                                                         employees.
                                                                         DHS will issue implementing directives regarding the movement of
                                                                         employees to or from a band with a rate range that is increased by a
                                                                         special rate supplement.
5 CFR Part 351 -- Reduction In Force                                     For the purpose of applying the reduction-in-force provisions of 5 CFR
                                                                         Part 351, DHS must establish representative rates for all band rate
                                                                         ranges.
                                                                         If a DHS employee moves from the pay system established under
                                                                         Subpart C to a GS position within DHS having a higher level of duties
                                                                         and responsibilities, DHS may issue implementing directives that
                                                                         provide for a special increase prior to the employee's movement in
                                                                         recognition that the employee will not be eligible for a promotion
                                                                         increase under the GS system.
                                                               Special Payments
5 U.S.C. Chapter 45, Subchapter III -- Award to Law Enforcement          §9701.361. Special skills payments. DHS will issue implementing
Officers for Foreign Language Capabilities                               directives regarding additional payments for specializations for which
Authorizes cash awards of up to 5% of basic pay to eligible law          the incumbent is trained and ready to perform at all times. DHS may
enforcement officers who possess and make substantial use of one or      determine the amount of the payments and the conditions for eligibility,
more foreign languages in the performance of official duties. An award   including any performance or service agreement requirements.
is in addition to basic pay.                                             Payments may be made at the same time as basic pay or in periodic
5 U.S.C. Chapter 53, Subchapter IX -- Special Occupational Pay           lump-sum payments. Special skills payments are not basic pay for any
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                  Title 5 Code of Federal Regulations
Systems                                                                          purpose and may be terminated or reduced at any time without
5 U.S.C. §5392. Establishment of special occupational pay systems                triggering pay retention or adverse action procedures.
Authorizes the President's pay agent to establish one or more special
occupational pay systems for any positions within occupations or
groups of occupations that the pay agent, determines for reasons of good
administration should not be classified under 5 U.S.C. Chapter 51 or be
subject to Chapter 53, Subchapter III. Certain requirements for
establishing special occupational pay systems are stated in the law.
5 U.S.C. §5545. Night, standby, irregular, and hazardous duty                    §9701.362. Special assignment payments. DHS will issue
differential                                                                     implementing directives regarding additional payments for employees
(d) Authorizes a differential for duty involving unusual physical                serving on special assignments in positions placing significantly greater
hardship or hazard.                                                              demands on the employee than other assignments within the employee's
5 U.S.C. Chapter 59, Subchapter III -- Overseas Differentials and                band. DHS may determine the amount of the payments and the
Allowances and Subchapter IV -- Miscellaneous Allowances                         conditions for eligibility, including any performance or service
Authorizes a danger pay allowance and an allowance based on duty at              agreement requirements. Payments may be made at the same time as
remote worksites.                                                                basic pay or in periodic lump-sum payments. Special assignment
                                                                                 payments are not basic pay for any purpose and may be terminated or
                                                                                 reduced at any time without triggering pay retention provisions or
                                                                                 adverse action procedures.
5 U.S.C. §5753. Recruitment and relocation bonuses                               §9701.363. Special staffing payments. DHS will issue implementing
5 U.S.C. §5754. Retention bonuses                                                directives regarding additional payments for employees serving in
Authorize recruitment, relocation, and retention bonuses to eligible             positions for which DHS is experiencing or anticipates significant
employees in positions likely to be difficult to fill or likely that essential   recruitment and/or retention problems. DHS may determine the amount
employees would leave in the absence of such bonuses. An employee                of the payments and the conditions for eligibility, including any
receiving a bonus must enter into a service agreement with the agency.           performance or service agreement requirements. Payments may be
Bonuses generally cannot exceed 25% of annual basic pay, but for a               made at the same time as basic pay or in periodic lump-sum payments.
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                 Current Law/Selected Regulations                                                    Final DHS Regulations
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                 Title 5 Code of Federal Regulations
critical agency need, may be up to 50% of annual basic pay. A bonus           Special staffing payments are not basic pay for any purpose and may be
may be paid as a lump sum and is not part of basic pay. Additionally,         terminated or reduced at any time without triggering pay retention or
retention bonuses of up to 10% of annual basic pay may be paid to a           adverse action procedures.
group of employees if there is a high risk that a significant portion of
the group would likely leave in the absence of such bonuses. For a
critical agency need, such bonuses may be up to 50% of annual basic
pay. [P.L. 108-411, Oct. 30, 2004, 118 Stat. 2305-2309]
                                                               Transitional Provisions
Authority derives from 5 U.S.C. §9701(a).                                     §9701.371. General. An affected employee may convert from the GS
                                                                              system, a prevailing rate system, the SL/ST system, or the SES system,
                                                                              as provided in §9701.302. For the purpose of this section and
                                                                              §§9701.372 through 9701.374, the terms "convert,"
                                                                              "converted,""converting," and "conversion" refer to employees who
                                                                              become covered by the pay system without a change in position (as a
                                                                              result of a coverage determination made under §9701.102(b) and
                                                                              exclude employees who are reassigned or transferred from a noncovered
                                                                              position to a position already covered by the DHS system. DHS will
                                                                              issue implementing directives prescribing the policies and procedures
                                                                              necessary to implement these transitional provisions.
Authority derives from 5 U.S.C. §9701(a).                                     §9701.372. Creating initial pay ranges. DHS must, after coordination
                                                                              with OPM, set the initial band rate ranges for the DHS pay system
                                                                              established under Subpart C. The initial ranges will link to the ranges
                                                                              that apply to converted employees in their previously applicable pay
                                                                              system (taking into account any applicable special rates and locality
                                                                              payments or supplements).
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                 Title 5 Code of Federal Regulations
5 U.S.C. §5541(3) defines "law enforcement officer" (LEO) as an           For employees who are law enforcement officers as defined in 5 U.S.C.
employee who is an LEO within the meaning of 5 U.S.C. §§8331(20) or       §5541(3) and who were covered by the GS system immediately before
8401(17), which define the term for purposes of federal retirement. The   conversion, the initial ranges must provide rates of basic pay that equal
law states other positions which meet the definition.                     or exceed the rates of basic pay these officers received under the GS
                                                                          system (taking into account any applicable special rates and locality
                                                                          payments or supplements).
Authority derives from 5 U.S.C. §9701(a).                                 §9701.373. Conversion of employees to the DHS pay system. When
                                                                          a pay system is established under Subpart C and applied to a category of
                                                                          employees, DHS must convert employees to the system without a
                                                                          reduction in their rate of pay (including basic pay and any applicable
                                                                          locality payment, special rate, locality rate supplement under
                                                                          §9701.332, or special rate supplement under §9701.333).
                                                                          When an employee receiving a special rate under 5 U.S.C. §5305 before
                                                                          conversion is converted to an equal rate of pay under the DHS pay
                                                                          system that consists of a basic rate and a locality or special rate
                                                                          supplement, the conversion will not be considered as resulting in a
                                                                          reduction in basic pay for the purpose of an adverse action under
                                                                          Subpart F.
                                                                          If another personnel action (e.g., promotion, geographic movement)
                                                                          takes effect on the same day as the effective date of an employee's
                                                                          conversion to the new pay system, DHS must process the other action
                                                                          under the rules pertaining to the employee's former system before
                                                                          processing the conversion action.
                                                                          An employee on a temporary promotion at the time of conversion must
                                                                          be returned to his or her official position of record prior to processing
                                                                          the conversion. If the employee is temporarily promoted immediately
                                                                          after the conversion, pay must be set under the rules for promotion
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                 Title 5 Code of Federal Regulations
                                                                         increases under the DHS system.
                                                                         The Secretary has discretion to make one-time pay adjustments for GS
                                                                         and prevailing rate employees when they are converted to the DHS pay
                                                                         system. DHS will issue implementing directives governing any such
                                                                         pay adjustment, including rules governing employee eligibility, pay
                                                                         computations, and the timing of any such pay adjustment.
                                                                         The Secretary has discretion to convert entry/developmental employees
                                                                         in noncompetitive career ladder paths to the pay progression plan
                                                                         established for the Entry/Developmental band to which the employee is
                                                                         assigned under the DHS pay system. DHS will issue implementing
                                                                         directives governing any such conversion, including rules governing
                                                                         employee eligibility, pay computations, and the timing of any such
                                                                         conversion. DHS must convert employees without a reduction in their
                                                                         rate of pay.
Authority derives from 5 U.S.C. §9701(a).                                §9701.374. Special transition rules for Federal Air Marshal
P.L. 107-71 (115 Stat. 597) established the Transportation Security      Service. Notwithstanding any other provision in Subpart C, if DHS
Administration.                                                          transfers Federal Air Marshal Service (FAMS) positions from TSA to
                                                                         another organization within DHS, DHS may cover those positions under
                                                                         a pay system that is parallel to the pay system that was applicable to the
                                                                         FAMS within TSA. DHS may, after coordination with OPM, modify
                                                                         that system. DHS will issue implementing directives on converting
                                                                         FAMS employees to any new pay system that may subsequently be
                                                                         established under Subpart C, consistent with the conversion rules in
                                                                         §9701.373.
                                                    Subpart D -- Performance Management
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                 Current Law/Selected Regulations                                                   Final DHS Regulations
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                 Title 5 Code of Federal Regulations
DHS Authority for Subpart D derives from 5 U.S.C. §9701 (a)-(c).             §9701.401. Purpose. Provides for the establishment in DHS of at least
5 U.S.C. §4302. Establishment of performance appraisal systems               one performance management system.
Each agency must develop one or more performance appraisal systems           The performance management system(s), working in conjunction with
which provide for periodic appraisals of job performance, encourage          the pay system established under Subpart C, is designed to promote and
employee participation in establishing performance standards, and use        sustain a high-performance culture by: adhering to merit principles;
the results of performance appraisals to train, reward, reassign, promote,   having a fair, credible, and transparent employee performance appraisal
reduce in grade, retain, and remove employees. Under OPM                     system; linking the pay and performance appraisal systems with the
regulations, each system must establish performance standards which          DHS strategic plan; involving employees in the design and
will, to the maximum extent feasible, permit the accurate evaluation of      implementation of the system; providing adequate training and
job performance on the basis of objective criteria (which may include        retraining for supervisors, managers, and employees in implementing
courtesy demonstrated to the public) related to the job in question for      and operating the system; providing for periodic performance feedback
each employee or position; communicate those standards and critical          and dialogue among supervisors, managers, and employees throughout
elements to employees at the beginning of each appraisal period;             the appraisal period, with specific timetables for review; having
evaluate each employee during the appraisal period on the standards;         effective safeguards so that the management of the system is fair and
recognize and reward employees whose performance warrants such;              equitable and based on employee performance; and providing a means
assist employees in improving unacceptable performance; and reassign,        for ensuring that adequate resources are allocated for the design,
reduce in grade, or remove employees who continue to have                    implementation, and administration of the system.
unacceptable performance, but only after an opportunity to demonstrate
acceptable performance. The agency head may administer and maintain
a performance appraisal system electronically.
5 U.S.C. Chapter 43, Subchapter II covers Performance Appraisal in the
Senior Executive Service
Authority derives from 5 U.S.C. §9701(a).                                    §9701.402. Coverage. Subpart D applies to eligible DHS employees
                                                                             in the categories listed below, subject to a determination by the
                                                                             Secretary or designee under §9701.102(b). Those eligible for coverage
                                                                             include employees who would otherwise be covered by 5 U.S.C.
                                                                             Chapter 43, and employees who were excluded from Chapter 43 by
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                 Title 5 Code of Federal Regulations
5 CFR §430.202 Coverage. (d) Agency requests for exclusions of             OPM under 5 CFR §430.202(d) prior to the date of coverage under
positions in the excepted service.                                         Subpart D, as determined under §9701.102(b).
                                                                           Employees who are not expected to be employed longer than a
                                                                           minimum period (as defined in §9701.404) during a single 12-month
                                                                           period are excluded from coverage under Subpart D.


 Authority derives from 5 U.S.C. §9701(a)-(c).                             §9701.403. Waivers. When a specified category of employees is
5 U.S.C. Chapter 43 -- Performance Appraisal                               covered by the performance management system(s) established under
5 CFR Part 430 -- Performance Management                                   Subpart D, 5 U.S.C. Chapter 43 is waived with respect to that category
                                                                           of employees.
5 CFR §430.203. Definitions. (unless otherwise noted)                      §9701.404. Definitions. "Appraisal" means the review and evaluation
"Appraisal" means the process under which performance is reviewed          of an employee's performance.
and evaluated.
"Appraisal period" means the established period of time for which          "Appraisal period" means the period of time established under a
performance will be reviewed and a rating of record will be prepared.      performance management system for reviewing employee performance.
"Critical element," "Non-critical element," and "Additional                "Competencies" means the measurable or observable knowledge, skills,
performance element" express the objectives, goals, program plans,         abilities, behaviors, and other characteristics required by a position.
work plans, and the like that express performance expectations.
                                                                           "Contribution" means a work product, service, output, or result
                                                                           provided or produced by an employee that supports the departmental or
                                                                           organizational mission, goals, or objectives.
Minimum period. An appraisal program shall establish a minimum             "Minimum period" means the period of time established by DHS during
period of performance that must be completed before a performance          which an employee must perform before receiving a rating of record.
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rating may be prepared. [5 CFR§430.207(a)]
"Performance" means accomplishment of work assignments or                "Performance" means accomplishment of work assignments or
responsibilities.                                                        responsibilities.
"Performance standard" means the management-approved expression of       "Performance expectations" means that which an employee is required
the performance threshold(s), requirement(s), or expectation(s) that     to do, as described in §9701.406, and may include observable or
must be met to be appraised at a particular level of performance. A      verifiable descriptions of quality, quantity, timeliness, and cost
performance standard may include, but is not limited to, quality,        effectiveness.
quantity, timeliness, and manner of performance.
"Appraisal" means the process under which performance is reviewed        "Performance management" means applying the integrated processes of
and evaluated.                                                           setting and communicating performance expectations, monitoring
                                                                         performance and providing feedback, developing performance and
                                                                         addressing poor performance, and rating and rewarding performance in
                                                                         support of the organization's goals and objectives.
"Performance appraisal system" means a framework of policies and         "Performance management system" means the policies and
parameters established by an agency for the administration of            requirements established under Subpart D, as supplemented by DHS
performance appraisal programs under 5 U.S.C. Chapter 43, Subchapter     implementing directives, for setting and communicating employee
I and 5 CFR Part 430, Subpart B.                                         performance expectations, monitoring performance and providing
                                                                         feedback, developing performance and addressing poor performance,
                                                                         and rating and rewarding performance.
"Rating of record" means the performance rating prepared at the end of   "Rating of record" means a performance appraisal prepared at the end of
an appraisal period for performance of agency-assigned duties over the   an appraisal period covering an employee's performance of assigned
entire period and the assignment of a summary level within a pattern.    duties over the applicable period; or to support a pay determination,
                                                                         including one granted in accordance with Subpart C of this part, a
                                                                         within-grade increase granted under 5 CFR §531.404, or a pay
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                                                                          determination granted under other applicable rules.
"Unacceptable performance" means performance by an employee which         "Unacceptable performance" means the failure to meet one or more
fails to meet established performance standards in one or more critical   performance expectations.
elements of the employee's position. [5 U.S.C. §4301(3)]


5 CFR Part 430 -- Performance Management contains the regulations         §9701.405. Performance management system requirements. DHS
to implement 5 U.S.C. Chapter 43 -- Performance Appraisal, including      will issue implementing directives that establish one or more
regulations on agency performance appraisal systems and programs, and     performance management systems for DHS employees, subject to the
planning, monitoring, and rating performance.                             requirements set forth in Subpart D.
5 U.S.C. Chapter 23 -- Merit System Principles                            Each DHS performance management system must: specify the
Covers Merit system principles and Prohibited personnel practices.        employees covered; provide for the periodic appraisal of the
                                                                          performance of each employee, generally once a year, based on
                                                                          performance expectations; specify the minimum period during which an
                                                                          employee must perform before receiving a rating of record; hold
                                                                          supervisors and managers accountable for effectively managing
                                                                          employee performance; include procedures for setting and
                                                                          communicating performance expectations, monitoring performance and
                                                                          providing feedback, and developing, rating, and rewarding performance;
                                                                          and specify the criteria and procedures to address the performance of
                                                                          employees who are detailed or transferred and for employees in other
                                                                          special circumstances.
                                                                          Supervisors and managers are responsible for: clearly communicating
                                                                          performance expectations and holding employees responsible for
                                                                          accomplishing them; making meaningful distinctions among employees
                                                                          based on performance; fostering and rewarding excellent performance;
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                                                                            and addressing poor performance.
5 U.S.C. §4302. Establishment of performance appraisal systems              §9701.406. Setting and communicating performance expectations.
(a) Each agency must develop one or more performance appraisal              Performance expectations must align with and support the DHS mission
systems which (a)(2) encourage employee participation in establishing       and its strategic goals, organizational program and policy objectives,
performance standards.                                                      annual performance plans, and other measures of performance. Such
(b) Each performance appraisal system must provide for (1) establishing     expectations include those general performance expectations that apply
performance standards which will, to the maximum extent feasible,           to all employees, such as standard operating procedures, handbooks, or
permit the accurate evaluation of job performance on the basis of           other operating instructions and requirements associated with the
objective criteria (which may include courtesy demonstrated to the          employee's job, unit, or function.
public) related to the job in question for each employee or position; (2)   Supervisors and managers must communicate performance
communicating the performance standards and the critical elements of        expectations, including those that may affect an employee's retention in
the employee's position to the employee at the beginning of each            the job. Performance expectations need not be in writing, but must be
appraisal period.                                                           communicated to the employee prior to holding the employee
5 CFR §430.102 Performance management.                                      accountable for them. Employees are always accountable for
(a) Performance management is the systematic process by which an            demonstrating appropriate standards of conduct, behavior, and
agency involves its employees, as individuals and members of a group,       professionalism, such as civility and respect for others.
in improving organizational effectiveness in the accomplishment of          Performance expectations may take the form of -- goals or objectives
agency mission and goals.                                                   that set general or specific performance targets at the individual, team,
(b) Performance management integrates the processes an agency uses to       and/or organizational level; organizational, occupational, or other work
(1) Communicate and clarify organizational goals to employees; (2)          requirements, such as standard operating procedures, operating
Identify individual and, where applicable, team accountability for          instructions, administrative manuals, internal rules and directives,
accomplishing organizational goals.                                         and/or other instructions that are generally applicable and available to
5 CFR §430.206 Planning Performance.                                        the employee; a particular work assignment, including expectations
(b) Performance plan. (1) Agencies shall encourage employee                 regarding the quality, quantity, accuracy, timeliness, and/or other
participation in establishing performance plans. (2) Performance plans      expected characteristics of the completed assignment; competencies an
shall be provided to employees at the beginning of each appraisal period    employee is expected to demonstrate on the job, and/or the
(normally within 30 days). (3) An appraisal program shall require that      contributions an employee is expected to make; or any other means, as
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each employee be covered by an appropriate written, or otherwise             long as it is reasonable to assume that the employee will understand the
recorded, performance plan based on work assignments and                     performance that is expected.
responsibilities. (4) Each performance plan shall include all elements       Supervisors must involve employees, insofar as practicable, in the
which are used in deriving and assigning a summary level, including at       development of their performance expectations. However, final
least one critical element and any non-critical element(s) .... (8)          decisions regarding performance expectations are within the sole and
Elements and standards shall be established as follows -- For a critical     exclusive discretion of management.
element -- At least two levels for appraisal shall be used with one level
being "Fully Successful" or its equivalent and another level being
"Unacceptable;" and a performance standard shall be established at the
"Fully Successful" level and may be established at other levels. For
non-critical elements, when established -- At least two levels for
appraisal shall be used, and a performance standard(s) shall be
established at whatever level(s) is appropriate. Additional requirements
are listed in the regulations.
5 CFR §430.207 Monitoring Performance.                                       §9701.407. Monitoring performance and providing feedback. In
(a) An appraisal program shall establish a minimum period of                 applying the requirements of the performance management system and
performance that must be completed before a performance rating may           its implementing directives and policies, supervisors must monitor the
be prepared.                                                                 performance of their employees and the organization; and provide
(b) An appraisal program shall include methods for appraising each           timely periodic feedback to employees on their actual performance with
critical and non-critical element during the appraisal period .... Ongoing   respect to their performance expectations, including one or more interim
appraisal methods shall include, but not be limited to, conducting one or    performance reviews during each appraisal period.
more progress reviews during each appraisal period.
(c) Appraisal programs should provide assistance whenever
performance is determined to be below "Fully Successful" or equivalent
but above "Unacceptable."
(d) An appraisal program shall provide for assisting employees in
improving unacceptable performance at any time during the appraisal
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                 Title 5 Code of Federal Regulations
period that performance is determined to be unacceptable in one or
more critical elements; and taking action based on unacceptable
performance.
5 CFR §430.102 Performance management.                                      §9701.408. Developing performance and addressing poor
(b) Performance management integrates the process an agency uses to         performance. Subject to budgetary and other organizational
(3) Identify and address developmental needs for individuals and where      constraints, a supervisor must provide employees with the proper tools
applicable teams.                                                           and technology to do their job and develop employees to enhance their
5 U.S.C. §4302. Establishment of performance appraisal systems              ability to perform.
(b) Each performance appraisal system must provide for (5) assisting        During the appraisal period, if a supervisor determines that an
employees in improving unacceptable performance; and (6) reassigning,       employee's performance is unacceptable, the supervisor must consider
reducing in grade, or removing employees who continue to have               the range of options available to address the performance deficiency,
unacceptable performance, but only after an opportunity to demonstrate      such as remedial training, an improvement period, a reassignment, an
acceptable performance.                                                     oral warning, a letter of counseling, a written reprimand, and/or an
5 U.S.C. §4303. Actions based on unacceptable performance                   adverse action; and take appropriate action to address the deficiency,
Authorizes an agency to reduce in grade or remove an employee for           taking into account the circumstances, including the nature and gravity
unacceptable performance.                                                   of the unacceptable performance and its consequences.
                                                                            As specified in Subpart G, employees may appeal adverse actions based
                                                                            on unacceptable performance.
5 CFR §430.206 Planning Performance.                                        §9701.409. Rating performance. Except as provided below, each
(b) Performance plan. (8) Elements and standards shall be established       DHS performance management system must establish a single summary
as follows -- For a critical element -- At least two levels for appraisal   rating level of unacceptable performance, a summary rating level of
shall be used with one level being "Fully Successful" or its equivalent     fully successful performance (or equivalent), and at least one summary
and another level being "Unacceptable;" and a performance standard          rating level above fully successful performance. For employees in an
shall be established at the "Fully Successful" level and may be             Entry/Developmental band, the DHS performance management
established at other levels. For non-critical elements, when established    system(s) may establish two summary rating levels, i.e., an
-- At least two levels for appraisal shall be used, and a performance       unacceptable rating level and a rating level of fully successful (or
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standard(s) shall be established at whatever level(s) is appropriate.          equivalent).
5 CFR §430.208. Rating performance.                                            At his or her sole and exclusive discretion, the Secretary, or designee
(a) As soon as practicable after the end of the appraisal period, a written,   may under extraordinary circumstances establish a performance
or otherwise recorded, rating of record shall be given to each employee.       management system with two summary rating levels, i.e., an
(b) (1) A level 1 summary ("Unacceptable") shall be assigned if and            unacceptable level and a higher rating level, for employees not in an
only if performance on one or more critical elements is appraised as           Entry/Developmental band.
"Unacceptable."                                                                A supervisor or other rating official must prepare and issue a rating of
(c) The method for deriving and assigning a summary level may not              record after the completion of the appraisal period. An additional rating
limit or require the use of particular summary levels (i.e., establish a       of record may be issued to reflect a substantial change in the employee's
forced distribution of summary levels). However, methods used to               performance when appropriate. A rating of record will be used as a
make distinctions among employees or groups of employees such as               basis for determining an increase in basic pay under §9701.342; a
comparing, categorizing, and ranking employees or groups on the basis          locality or special rate supplement increase under §9701.336; a
of their performance may be used for purposes other than assigning a           performance pay increase determination under §9701.342(a); a within-
summary level including, but not limited to, award determinations and          grade increase determination under 5 CFR §531.404, prior to
promotion decisions.                                                           conversion to the pay system established under Subpart C; a pay
(d) An appraisal program may use one of eight patterns of summary              determination under any other applicable pay rules; awards under any
rating levels. Level 1 is "Unacceptable," Level 3 is "Fully Successful,"       legal authority; including 5 U.S.C. Chapter 45, 5 CFR Part 451, and a
and Level 5 is "Outstanding." Additional requirements are listed in the        departmental or organizational awards program; eligibility for
regulations.                                                                   promotion; or such other action that DHS considers appropriate, as
5 U.S.C. §4302. Establishment of performance appraisal systems                 specified in the implementing directives.
(a) Each agency must develop one or more performance appraisal                 A rating of record must assess an employee's performance with respect
systems which (3) use the results of performance appraisals to ... reward      to his or her performance expectations and/or relative contributions and
... employees.                                                                 is considered final when issued to the employee with all appropriate
(b) Each performance appraisal system must provide for (4) recognizing         reviews and signatures.
and rewarding employees whose performance warrants such.                       DHS may not impose a forced distribution or quota on any rating
5 U.S.C. Chapter 45 -- Incentive Awards                                        level(s).
5 U.S.C. §4505a. Performance-based cash awards                                 A rating of record issued under Subpart D is an official rating of record
An employee whose most recent performance rating was "fully                    for the purpose of any provision of Title 5 CFR, for which an official
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successful" or higher may be paid a cash award.                    rating of record is required.
                                                                   DHS may not lower the rating of record of an employee on an approved
                                                                   absence from work, including the absence of a disabled veteran to seek
                                                                   medical treatment, as provided in Executive Order 5396.
                                                                   A rating of record may be grieved by a non-bargaining unit employee
                                                                   (or a bargaining unit employee when no negotiated procedure exists)
                                                                   through an administrative grievance procedure established by DHS. A
                                                                   bargaining unit employee may grieve a rating of record through a
                                                                   negotiated grievance procedure, as provided in Subpart E. An arbitrator
                                                                   hearing a grievance is subject to the standards of review set forth in
                                                                   §9701.521(g)(2). Except as otherwise provided by law, an arbitrator
                                                                   may not conduct an independent evaluation of the employee's
                                                                   performance or otherwise substitute his or her judgment for that of the
                                                                   supervisor.
                                                                   A supervisor or other rating official may prepare an additional
                                                                   performance appraisal for the purposes specified in the applicable
                                                                   performance management system (e.g., transfers and details) at any time
                                                                   after the completion of the minimum period. Such an appraisal is not a
                                                                   rating of record.
                                                                   DHS implementing directives will establish policies and procedures for
                                                                   crediting performance in a reduction in force, including policies for
                                                                   assigning additional retention credit based on performance. Such
                                                                   policies must comply with 5 U.S.C. Chapter 35 and 5 CFR §351.504.
5 U.S.C. Chapter 35 -- Retention Preference, Restoration, and
Reemployment
5 CFR §351.504 Credit for performance.
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 5 U.S.C. §4304. Responsibilities of the Office of Personnel              §9701.410. DHS responsibilities. In carrying out its performance
 Management                                                               management system(s), DHS must transfer ratings between subordinate
 OPM must review each performance appraisal system developed by any       organizations and to other federal departments or agencies; evaluate its
 agency and determine whether the performance appraisal systems meets     performance management system(s) for effectiveness and compliance
 the requirements of 5 U.S.C. Chapter 43, Subchapter I. OPM may           with Subpart D, DHS implementing directives and policies, and the
 direct that corrective action be taken if an agency performance system   provisions of 5 U.S.C. Chapter 23 that set forth the merit system
 does not meet the requirements of Subchapter I.                          principles and prohibited personnel practices; provide OPM with a copy
 The Comptroller General from time to time must review on a selected      of the implementing directives, policies, and procedures that implement
 basis performance appraisal systems to determine the extent to which     Subpart D; and comply with 29 CFR §1614.102(a)(5), which requires
 any such system meets the requirements of Subchapter I and must          agencies to review, evaluate, and control managerial and supervisory
 periodically report its findings to OPM and the Congress.                performance to ensure enforcement of the policy of equal opportunity.



Source: U.S. Department of Homeland Security and U.S. Office of Personnel Management, "Department of Homeland Security Human Resources Management
System," Federal Register, vol. 70, no. 20, February 1, 2005, pp. 5271-5347.

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