Capping Bonuses

The Obama administration is considering capping bonuses for Senior Executive Service employees at 5 percent and non-SES employees at 1 percent, according to unreleased guidance to department and agency heads published on Wednesday.

Because of the current fiscal environment and budget restraints, the President directed the Office of Personnel Management and the Office of Management and Budget to evaluate the federal performance award system for cost and effectiveness, according to a copy of the memo obtained by The Washington Post.

"We have identified a number of concerning trends," the memo states. "In many cases, awards are broadly and inconsistently allocated and some federal employees have come to expect awards as entitlements."

In addition, recent survey results show that a large number of agency managers and employees do not believe award systems are an accurate reflection of employee performance, the memo states.

As a result, OPM and OMB will be working with agencies to improve performance management and appraisal systems to ensure they fairly reflect employee performance. Agencies also will be limited to reducing total spending on individual performance for SES members to no more than 5 percent and non-SES employee to no more than 1 percent during calendar year 2012, with significant progress toward that level in 2011, the memo states.

The cap on bonuses does not include the 3Rs -- recruitment, relocation and retention incentives -- but the memo advises agencies not to exceed 2010 spending on these incentives in 2011 and 2012. OPM issued proposed regulations in February to overhaul the way agencies use the 3Rs due to concerns about the continued growth of the program given recent market conditions.

The memo comes on the heels of a two-year pay freeze announced by President Obama in late 2010.

It's unclear what impact the freeze would have the recruitment and retention of federal IT workers, particularly given recent reports that show private sector IT pros have endured two years of nearly flat salaries. At the same time, employees at Google received a 10 percent across-the-board pay increase, while some received bonuses upwards of $150 million.

What are your thoughts on the potential cap on bonuses? How will it impact your morale and career plans through 2012?