By Ruben Gomez
Federal News Radio

The administration has limited the amount federal agencies can spend on performance awards for employees.

Agencies must cap total spending on individual awards for senior-level employees to no more than 5 percent of aggregate salaries for those positions, according to John Berry, director of the Office of Personnel Management (OPM), and Jeffrey Zients, the federal chief performance officer and deputy director of the Office of Management and Budget (OMB), in a memo issued Friday. Agencies must also limit award spending for all other employees to no more than 1 percent of aggregate salaries for that group.

Agencies should use aggregate salaries at the end of fiscal 2010 as a basis for calculating the limits.

The spending caps, largely driven by budget constraints, will take effect in fiscal 2012, but the administration expects agencies to begin making progress in the current fiscal year.

“In many cases, awards are broadly and inconsistently allocated and some Federal employees have come to expect awards as part of their compensation,” Berry and Zients wrote. “At the same time, recent survey results show that a large number of both agency managers and employees do not perceive the current employee performance management/award systems to be fair or accurately reflect differences in performance levels.”

The guidance also extends a freeze on awards and bonuses for political appointees. That freeze, which had been scheduled to sunset at end of FY 2011, will continue in FY 2012.

“Agencies are encouraged to leverage existing award programs to reward employees who identify improvements that result in documented, validated cost savings and productivity improvements,” according to the memo. “An emphasis on awards of this nature is particularly important in light of the fiscal challenges we are facing.”

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