Administration Circulates Memo Recommending Cap on Merit Bonuses


A White House memo addressed to all department and agency heads was leaked last week containing guidance on the distribution of performance awards for federal employees. According to the memo, the Administration would cap bonuses for Senior Executive Service employees at five percent of aggregate salary and non-SES employee bonuses at one percent.

Delivering the memo at the request of the White House, top officials from the Office of Personnel Management (OPM) and the Office of Management and Budget (OMB) decided that imposing these caps for the 2011 and 2012 performance cycles would be the best option for reducing costs while continuing to reward high-performing employees. The new limits will only apply to individual awards, including rating-based performance awards and individual special act awards.

The memo states that there is a “need to manage budget resources carefully” and it also states a concern that “federal employees have come to expect awards as entitlements.” It bases these finding on criticisms from federal workers arguing that the current bonus system is not implemented fairly. Citing the latest Federal Employee Viewpoint Survey, it states “[o]nly 36 percent of employees believe that differences in performance are recognized and only 43 percent believe that awards reflect how well employees perform their jobs.”

Though many employees would agree that the current system is imperfect, the Administration would likely be hard pressed to find anyone who would prefer a system where hard-earned merit awards are capped. Many federal workers would also question the timing of this proposal, considering the fact that the workforce is already in the first year of a two year pay freeze. Capping merit bonuses will mean that even the highest performers will be unable to make up for the loss of income due to the freeze.

The memo reaffirms that agencies are to “honor all collective bargaining obligations and discuss agency award programs in agency labor-management forums.” The memo also encourages “equitable distribution of awards between manager/supervisors and nonsupervisory employees.” NFFE will continue to defend the performance awards earned by all federal employees who work hard to serve our country every day.