Order Code RL32261
CRS Report for Congress
Received through the CRS Web
Homeland Security: Final Regulations
on Classification, Pay, and Performance
Management Compared with Current Law
Updated February 2, 2005
Barbara L. Schwemle
Analyst in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

Homeland Security: Final Regulations on
Classification, Pay, and Performance Management
Compared with Current Law
Summary
The Secretary of the Department of Homeland Security (DHS) 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 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. (The regulations also affect labor-management relations
(Subpart E) and adverse actions (Subpart F) and appeals (Subpart G), but these areas
are outside the purview of this report.)
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.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subpart A — General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subpart B — Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Classification Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Classification Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Transitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Subpart C — Pay and Pay Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Overview of Pay System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Setting and Adjusting Rate Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Locality and Special Rate Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Performance-Based Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Pay Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Special Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Transitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subpart D — Performance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
List of Tables
Table 1. Department of Homeland Security Human Resources Management
System: Final Regulations Compared With Current Law/Selected
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Homeland Security: Final Regulations on
Classification, Pay, and Performance
Management Compared With Current Law
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 proposed regulations
to implement a new HRM system for DHS in the Federal Register.2 The final
regulations were published in the Federal Register on February 1, 2005.3 The design
process that culminated in proposed rules for the new system was discussed in the
background section of the proposed regulations.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. (Washington: CRS).
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, Feb. 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, Feb. 1, 2005, pp. 5271-5347.
4 “Designing Options for a New HR System,” ibid., pp. 8031-8035.

CRS-2
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.5
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. The fact sheet states that the system will be
implemented in phases according to the following timetable:
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.
5 U.S. Department of Homeland Security, DHS and OPM Final Human Resource
Regulations Fact Sheet
, Jan. 26, 2005. (Available on the Internet at [http://www.dhs.gov],
visited Jan. 26, 2005).

CRS-3
Among the features of the final regulations are the following.
! 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 (
“Unacceptable,” “Fully Successful,” and at least one level above
“Fully Successful”) 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.
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, see CRS Report RL32255, Homeland Security: Proposed

CRS-4
Regulations for the Department of Homeland Security Human Resources
Management System (Subpart E) Compared With Current Law
. 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.

CRS-5
Table 1. 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
§9701.101. Purpose. To establish a system that is
management system. (a) Notwithstanding any other
mission-centered, performance-focused, flexible,
provision of this part, the Secretary of Homeland
contemporary, and excellent; that generates respect and
Security may, in regulations prescribed jointly with the
trust through employee involvement; that is based on the
Director of the Office of Personnel Management,
principles of merit and fairness embodied in the statutory
establish, and from time to time adjust, a human
merit system principles; and that complies with all other
resources management system for some or all of the
applicable laws.
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.
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

CRS-6
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
Any new DHS classification, pay, or performance
Senior Executive Service.
management system covering Senior Executive Service
(SES) members must be consistent 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

CRS-7
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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. “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

CRS-8
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
(a) “Employee” means an officer and an individual who
that term in 5 U.S.C. §2105. “Secretary” means the
is appointed in the civil service by one of the following
Secretary of Homeland Security or, as authorized, the
acting in an official capacity — the President; a Member
Deputy Secretary of Homeland Security. “Secretary or
or Members of Congress, or the Congress; a member of a
designee” means the Secretary or a DHS official
uniformed service; an individual who is an employee
authorized to act for the Secretary in the matter
under this section; the head of a government controlled
concerned who serves as the Undersecretary for
corporation; or an adjutant general designated by the
Management or as DHS’ Chief Human Capital Officer.
Secretary concerned under 32 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
§9701.104. Scope of authority. Subject to the
management system.
requirements and limitations in 5 U.S.C. §9701, these
(b)(c) The HRM system must be flexible and
Title 5 chapters and related regulations may be waived or
contemporary. It cannot waive, modify, or otherwise
modified: Chapter 43 (performance appraisal systems);

CRS-9
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
affect:
Chapter 51 (General Schedule (GS) job classification);
Chapter 53 (pay for GS employees, pay and job grading
— the public employment principles of merit and
for Federal Wage System employees, and pay for certain
fitness at 5 U.S.C. §2301, including the principles
other employees); Chapter 71 (labor relations); Chapter
of hiring based on merit, fair treatment without
75 ( adverse actions and certain other actions); and
regard to political affiliation or other non-merit
Chapter 77 (appeal of adverse actions and certain other
considerations, equal pay for equal work, and
actions).
protection of 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
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

CRS-10
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
(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
§9701.105. Continuing collaboration. Relates to the
management system.
participation of employee representatives in developing
(h) Effective five years after the conclusion of the
implementing directives.
transition period defined under §1501 of P.L. 107-296,
all authority to issue regulations under the section
(including regulations which would modify, 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.
For the purpose of applying other provisions of law or
Government-wide regulations that reference provisions
5 U.S.C. Chapter 43 (Performance Appraisal; Chapter 51
under 5 U.S.C. Chapters 43, 51, 53, 71, 75, and 77, the

CRS-11
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
(Classification); Chapter 53 (Pay Rates and Systems);
referenced provisions are not waived but are modified
Chapter 71 (Labor-Management Relations); Chapter 75
consistent with the corresponding regulations in 5 CFR
(Adverse Actions); and Chapter 77 (Appeals).
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 Part 9701 (i.e., 5
U.S.C. Chapters 43, 51, 53, 71, 75, and 77), DHS
employees are deemed to be covered by the applicable
chapter notwithstanding coverage under a system
established under this part. Selected examples of
provisions that continue to apply to any DHS employees
(notwithstanding coverage under Subparts B through G)
include, but are not limited to: foreign language awards
5 U.S.C. §§4521-4523. Award to Law Enforcement
for law enforcement officers; pay for firefighters;
Officers for Foreign Language Capabilities; 5 U.S.C.
differentials for duty involving physical hardship or
§5545b (Pay for firefighters); 5 U.S.C. §5545(d)
hazard; recruitment, relocation, and retention payments;
(hardship or hazard pay differentials); 5 U.S.C. §§5753-
physicians’ comparability allowances; and the higher cap
5754 (Recruitment and relocation bonuses and Retention
on relocation bonuses for law enforcement officers.
allowances); 5 U.S.C. §5948 (Physicians comparability
Application of the back pay law with regard to attorney
allowances); P.L. 101-509, Sec. 407, 5 U.S.C. §5305
fees and labor relations will be consistent with
note (Relocation payments for law enforcement officers); §9701.706(h) and §9701.517, respectively.
When a specified category of employees is covered by a
classification and pay system established under Subparts
B and C, the following provisions do not apply: time-in-
5 CFR Part 300, Subpart F (Time-in-Grade Restrictions);
grade restrictions that apply to competitive service GS
5 U.S.C. §5755 (Supervisory differentials); P.L. 101-
positions; supervisory differentials; and law enforcement
509, Sec. 404 and 404, 5 U.S.C. 5303 note (Special rates
officer special rates and geographic adjustments.
and Special pay adjustments for law enforcement
officers).

CRS-12
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
Nothing in this part waives, modifies or otherwise affects
the employment discrimination laws that the Equal
Employment Opportunity Commission (EEOC) enforces
42 U.S.C. §2000e (Equal Employment Opportunity); 29
under 42 U.S.C. §2000e et seq., 29 U.S.C. §621 et seq.,
U.S.C. §621 (Age discrimination in employment); 29
29 U.S.C. §791 et seq., and 29 U.S.C. §206(d).
U.S.C. §791 (Employment of individuals with
Employees and applicants for employment in DHS will
disabilities); 29 U.S.C. §206(d) (Prohibition of sex
continue to be covered by EEOC’s federal sector
discrimination); 29 CFR Part 1614 — Federal Sector
regulations found at 29 CFR Part 1614.
Equal Employment Opportunity (Subparts A-F,
including Agency Program to Promote Equal
Employment Opportunity, Appeals and Civil Actions,
Remedies and Enforcement).
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

CRS-13
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
DHS authority for Subpart B derives from 5 U.S.C.
§9701.201. Purpose. Subpart B contains regulations
§9701(a)-(c).
establishing a classification structure and rules for
5 U.S.C. Chapter 51 — Classification
covered DHS employees and positions to replace the 5
5 U.S.C. §5101. Purpose. To provide a plan for
U.S.C. Chapter 51 classification structure and rules and
classification of positions whereby in determining the
the 5 U.S.C. Chapter 53, Subchapter IV job grading
rate of basic pay which an employee will receive, the
system, in accordance with the merit principle of equal
principle of equal pay for substantially equal work will
pay for work of equal value. Any classification system
be followed, and variations in rates of basic pay paid to
must be established in conjunction with the pay system
different employees will be in proportion to substantial
described in Subpart C.
differences in 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 a
local wage area when there are substantial or
recognizable differences in duties, responsibilities, and

CRS-14
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
Eligible for coverage are: employees and positions that
Pay Rates
would otherwise be covered by the GS classification
5 U.S.C. Chapter 53, Subchapter IV — Prevailing Rate
system; employees and positions that would otherwise be
Systems
covered by a prevailing rate system; employees in
5 U.S.C. §5376. Pay for certain senior-level positions
senior-level (SL) and scientific or professional (ST)
5 U.S.C. Chapter 53, Subchapter VIII — Pay for the
positions who would otherwise be covered by 5 U.S.C.
Senior Executive Service
§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
§9701.203. Waivers. When a specified category of
classification and grading of positions)
employees is covered by a classification system
5 U.S.C. §5346. Job grading system
established under Subpart B, 5 U.S.C. Chapter 51 and 5
5 U.S.C. §5108. Classification of positions above GS-15
U.S.C. §5346, and related regulations, are waived with
respect to that category of employees, except as provided
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
§9701.204. Definitions.
otherwise noted)
“Band” means a work level or pay range within an

CRS-15
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
“Grade” includes all classes of positions which, although
occupational cluster.
different with 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 calendar year at the rate fixed by law or
“Basic pay” means an employee’s rate of pay before any
administrative action for the position ... including night
deductions and exclusive of additional pay of any kind,
and environmental differentials for prevailing rate
except as expressly provided by law or regulation. It
employees, but before any deductions and exclusive of
includes locality and special rate supplements for the
additional pay of any other kind. [5 CFR §530.202]
specific purposes prescribed in §§9701.332(c) and
9701.333.
“Classification” means the analysis and identification of
a position and placing it in a class under the position-
“Classification” also referred to as job evaluation, means
classification plan established by OPM under 5 U.S.C.
the process of analyzing and assigning a job or position
Chapter 51. [5 CFR §511.101(c)]
to an occupational series, cluster, and band for pay and
other related purposes.
“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
“Occupational cluster” means a grouping of one or more
which are sufficiently similar, as to kind or subject-
associated or related occupations or positions. An
matter of work; level of difficulty and responsibility; and
occupational cluster may include one or more
the qualification requirements of the work; to warrant
occupational series.
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.

CRS-16
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
“Position” means the work, consisting of the duties and
“Position” or “Job” means the duties, responsibilities,
responsibilities, assigned by competent authority for
and related competency requirements that are assigned to
performance by an employee. [5 CFR §511.101(e)]
an employee whom the Secretary or designee approves
for coverage under §9701.202(a).
Classification of positions is not subject to collective
§9701.205. Bar on collective bargaining. As provided
bargaining.
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.
Classification Structure
5 U.S.C. §5106. Basis for classifying positions
§9701.211. Occupational clusters. For purposes of
Each position is placed in its appropriate class on the
classifying positions, DHS may, after coordination with
basis of the duties and responsibilities of the position and
OPM, establish occupational clusters based on factors
the qualifications required by those duties and
such as mission or function; nature of work;
responsibilities. Each class is placed in its appropriate
qualifications or competencies; career or pay progression
grade on the basis of the level of difficulty,
patterns; relevant labor-market features; and other
responsibility, and qualification requirements of the work
characteristics of those occupations or positions. DHS
of the class.
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
Provides for 15 General Schedule pay grades. The
levels of work and corresponding pay ranges, DHS may,
statute defines each of the pay grades in terms of their
after coordination with OPM, establish one or more
difficulty and responsibility.
bands within each occupational cluster. Each
occupational cluster may include, but is not limited to,

CRS-17
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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
Each position is placed in its appropriate class on the
definitions for each band which specify the type and
basis of the duties and responsibilities of the position and
range of difficulty and responsibility, qualifications,
the qualifications required by those duties and
competencies, or other characteristics of the work
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
DHS must, after coordination with OPM, establish
positions
qualification standards and requirements for each
OPM , after consulting the agencies, prepares standards
occupational cluster, occupational series, and/or band.
for placing positions in their proper classes and grades.
DHS may use the qualification standards established by

CRS-18
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
OPM may make such inquiries or investigations of the
OPM or, after coordination with OPM, may establish
duties, responsibilities, and qualification requirements of
different qualification standards. Any DHS authority to
positions as it considers necessary for this purpose. In
establish qualification standards or requirements under 5
the standards, OPM defines the various classes of
U.S.C. Chapters 31 and 33 and OPM implementing
positions in terms of duties, responsibilities, and
regulations is not waived or modified.
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. §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
Provides for 15 General Schedule pay grades. The
develop a methodology for describing and documenting
statute defines each of the pay grades in terms of their
the duties, qualifications, and other requirements of
difficulty and responsibility.
categories of jobs, and DHS must make such descriptions
5 U.S.C. §5108. Classification of positions above GS-
and documentation available to affected employees.
15
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

CRS-19
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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.
5 U.S.C. §5106. Basis for classifying positions
An authorized agency official must assign occupational
Each position is placed in its appropriate class on the
series to jobs consistent with definitions established by
basis of the duties and responsibilities of the position and
OPM or by DHS, after coordination with OPM; and
the qualifications required by those duties and
apply the criteria and definitions required by §9701.211
responsibilities. Each class is placed in its appropriate
and §9701.212 to assign jobs to an appropriate
grade on the basis of the level of difficulty,
occupational cluster and band.
responsibility, and qualification requirements of the work
of the class.
5 U.S.C. §5105. Standards for classification of
DHS must establish procedures for classifying jobs and
positions
may make such inquiries or investigations of the duties,
OPM , after consulting the agencies, prepares standards
responsibilities, and qualification requirements of jobs as
for placing positions in their proper classes and grades.
it considers necessary for the purposes of this section.
OPM may make such inquiries or investigations of the
Classification decisions become effective on the date
duties, responsibilities, and qualification requirements of
designated by the authorized agency official who makes
positions as it considers necessary for this purpose. In
the decision.
the standards, OPM defines the various classes of
positions 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,

CRS-20
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
budget, and fiscal purposes.
5 U.S.C. §5111. Revocation and restoration of
DHS must establish a plan to periodically review the
authority to classify positions
accuracy of 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.
5 U.S.C. §5110. Review of classification of positions
§9701.222. Reconsideration of classification
OPM, from time to time, reviews such number of
decisions. An individual employee may request that
positions in each agency as will enable it to determine
DHS or OPM reconsider the pay system, occupational
whether the agency is placing positions in classes and
cluster, occupational series, or band assigned to his or
grades in conformance with or consistently with
her current official position of record at any time.
published standards. OPM takes corrective action when
DHS will, after coordination with OPM, establish
it finds that a position is not placed in its proper class and
implementing directives for reviewing requests for
grade in conformance with published standards.
reconsideration, including nonreviewable issues, rights
5 U.S.C. §5112. General authority of OPM
of representation, and the effective date of any corrective
OPM may place a position in the appropriate class and
actions. OPM will, after consulting with DHS, establish
grade, determine whether a position is in the appropriate
separate policies and procedures for reviewing
class and grade, and change a position from one class
reconsideration requests.
and grade to another when the facts as to the duties,
An employee may request that OPM review a DHS
responsibilities, and qualification requirements of a
determination. If an employee does not request an OPM
position warrant. An employee may request that OPM
reconsideration decision, DHS’s classification
exercise its authority in this regard.
determination is final and not subject to further review or
appeal.
OPM’s final determination on a request is not subject to
further review or appeal.
Transitional Provisions

CRS-21
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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
P.L. 107-71 (115 Stat. 597) established the
Marshal Service. Notwithstanding any other provision
Transportation Security Administration.
in Subpart B, if DHS 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

CRS-22
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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.
§9701.301. Purpose. Subpart C contains regulations
§9701(a)-(c).
establishing pay structures and pay administration rules
5 U.S.C. Chapter 53 — Pay Rates and Systems
for covered DHS employees to replace the pay structures
5 U.S.C. §5301. Policy
and pay administration rules established under 5 U.S.C.
It is the policy of Congress that federal pay fixing for
Chapter 53, as authorized by 5 U.S.C. §9701. These
employees under the General Schedule be based on the
regulations are designed to provide DHS with the
principles that there be equal pay for substantially equal
flexibility to allocate available funds strategically in
work within each local pay area; within each local pay
support of DHS mission priorities and objectives.
area, pay distinctions be maintained in keeping with
Various features that link pay to employees’ performance
work and performance distinctions; federal pay rates be
ratings are designed to promote a high-performance
comparable with non-federal pay rates for the same
culture within DHS.
levels of work within the same local pay area; and any
Any pay system prescribed under Subpart C must be
existing pay disparities between federal and non-federal
established in conjunction with the classification system
employees should be completely eliminated.
described in Subpart B.
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

CRS-23
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
§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).
5 U.S.C. Chapter 53, Subchapter III — General Schedule
Eligible for coverage are: employees who would
Pay Rates
otherwise be covered by the GS pay system; employees
5 U.S.C. Chapter 53, Subchapter IV — Prevailing Rate
who would otherwise be covered by a prevailing rate
Systems
system; employees in senior-level (SL) and scientific or
5 U.S.C. §5376. Pay for certain senior-level positions
professional (ST) positions who would otherwise be
5 U.S.C. Chapter 53, Subchapter VIII — Pay for the
covered by 5 U.S.C. §5376; and SES members who
Senior Executive Service
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.
5 U.S.C. §5307. Limitation on certain payments
Provisions of 5 U.S.C. Chapter 53 that are not waived

CRS-24
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
5 U.S.C. §§5311-5318. Executive Schedule Pay Rates
are: Sections 5307; 5311 through 5318; and 5377.
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
Section 5373 is modified to raise the limit on rates of
administrative action
basic pay, including any applicable locality payment or
Generally, the limitation is Executive Schedule level IV.
supplement, for DHS employees who are not covered by
Subpart C and whose pay is set by 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).

CRS-25
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 IV — Prevailing Rate
In approving the coverage of employees who would
Systems
otherwise be covered by a prevailing rate system, DHS
5 U.S.C. §5343. Prevailing rate determinations; wage
may limit the waiver so that affected employees remain
schedules; night differentials
entitled to environmental or other differentials
(c)(4) environmental or other differentials for blue-collar
established under 5 U.S.C. §5343(c)(4) and night shift
workers
differentials established under 5 U.S.C. §5343(f) if such
(f) night shift differentials for blue-collar workers
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
5 U.S.C. §5382. Establishment and adjustment of rates
are covered by a basic pay system established under
of pay for the Senior Executive Service
Subpart C are considered to be paid under 5 U.S.C.
5 U.S.C. §5307. Limitation on certain payments
§§5376 and 5382, respectively, for the purpose of
(d) For an employee who is paid under 5 U.S.C. 5376 or
applying 5 U.S.C. §5307(d).
5383 (setting 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
§9701.304. Definitions. “48 contiguous States” means
otherwise noted)
the States of the United States, excluding Alaska and
Hawaii, but including the District of Columbia.
“Grade” includes all classes of positions which, although
“Band” means a work level or pay range within an
different with respect to kind or subject-matter of work,
occupational cluster.
are sufficiently equivalent as to level of difficulty and
“Band rate range” means the range of rates of basic pay
responsibility; and level of qualification requirements of
(excluding any locality or special rate supplements)

CRS-26
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
the work to warrant their inclusion within one range of
applicable to employees in a particular band, as
rates of basic pay in the General Schedule.
described in §9701.321. Each band rate range is defined
by a minimum and maximum rate.
“Basic pay” means the total amount of pay received
“Basic pay” means an employee’s rate of pay before any
during any one calendar year at the rate fixed by law or
deductions and exclusive of additional pay of any kind,
administrative action for the position held by an
except as expressly provided by law or regulation. For
employee, including night and environmental
the specific purposes prescribed in §§9701.332(c) and
differentials for prevailing rate employees, but before
9701.333, respectively, basic pay includes locality and
any deductions and exclusive of additional pay of any
special rate supplements.
other kind. [5 CFR §530.202]
“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
“Demotion” means a reduction to a lower band within
continuously employed, from one General Schedule (GS)
the same occupational cluster or a reduction to a lower
grade to a lower GS grade, with or without reduction in
band in a different occupational cluster under
pay; or a higher rate paid under authority other than 5
implementing directives issued by DHS pursuant to
U.S.C. Chapter 53, Subchapter III, to a lower rate within
§9701.355.
a GS grade. [5 CFR §531.202]
“Comparability payment” means a payment payable
“Locality rate supplement” means a geographic-based
under 5 U.S.C. §5304 (locality-based comparability
addition to basic pay, as described in §9701.332.
payments).
“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.

CRS-27
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
“Promotion” means a change of an employee, while
“Promotion” means an increase to a higher band within
continuously employed, from one General Schedule (GS)
the same occupational cluster or an increase to a higher
grade to a higher GS grade; or a lower rate paid under
band in a different occupational cluster under
authority other than 5 U.S.C. Chapter 53, Subchapter III,
implementing directives issued by DHS pursuant to
to a higher rate within a GS grade. [5 CFR §531.202]
§9701.355.
“Rating of record” means the performance rating
“Rating of record” means a performance appraisal
prepared at the end of an appraisal period for
prepared at the end of an appraisal period covering an
performance of agency-assigned duties over the entire
employee’ performance of assigned duties against
period and the assignment of a summary level within a
performance expectations (as defined in §9701.404) over
pattern. [5 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
“SL/ST” refers to an employee serving in a senior-level
above GS-15 pursuant to 5 U.S.C. §5108; and scientific
position paid under 5 U.S.C. §5376. The term “SL”
or professional positions established under 5 U.S.C.
identifies a senior-level employee covered by 5 U.S.C.
§3104. [5 U.S.C. §5376]
§§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
“SES” means the Senior Executive Service established
in an agency that is classified above GS-15 pursuant to 5
under 5 U.S.C. Chapter 31, Subchapter II.
U.S.C. §5108 or in level IV 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
“Special rate supplement” means an addition to basic pay
pay for one or more grades or levels, occupational
for a particular category of employees to address staffing

CRS-28
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
groups, series, classes, or subdivisions thereof. Locality-
problems, as described in §9701.333. A special rate
based comparability payments shall be available to
supplement is paid in place of any lesser locality rate
employees receiving special rates to such extent as the
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
“Unacceptable performance” means the failure to meet
employee that fails to meet established performance
one or more performance expectations, as described in
standards in one or more critical elements of the
§9701.406.
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 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
§9701.311. Major features. Through the issuance of
System
implementing directives, DHS will establish a pay
5 U.S.C. §5303. Annual adjustments to pay schedules
system that governs the setting and adjusting of covered
5 U.S.C. §5304. Locality-based comparability payments
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
5 U.S.C. Chapter 53, Subchapter II. Executive Schedule
structure described in Subpart B; policies regarding the
Pay Rates
setting and adjusting of basic pay rate ranges based on
5 U.S.C. Chapter 53, Subchapter IV. Prevailing Rate
mission requirements, labor market conditions, and other
Systems (pay setting for blue-collar workers)
factors, as described in §§9701.321 through 9701.322;

CRS-29
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 VIII. Pay for the
policies regarding the setting and adjusting of
Senior Executive Service
supplements to basic pay 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
No allowance, differential, bonus, award, or other similar
employee an annual rate of basic pay in excess of the rate
cash payment may be paid to an employee in a calendar
for level III of the Executive Schedule, except that DHS
year if, or to the extent that, when added to the total basic
may establish the maximum annual rate of basic pay for
pay paid or payable to such employee would cause the
members of the SES at the rate for level II of the
total to exceed the annual rate of basic pay for Executive
Executive Schedule if DHS obtains the certification
Schedule level I.
specified in 5 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.

CRS-30
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
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

CRS-31
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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.

CRS-32
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
Provides for 15 General Schedule pay grades. The
with OPM, DHS may establish ranges of basic pay for
statute defines each of the pay grades in terms of their
bands, with minimum and maximum rates set and
difficulty and responsibility.
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
Each position is placed in its appropriate class on the
its sole and exclusive discretion, DHS may, after
basis of the duties and responsibilities of the position and
coordination with OPM, set and adjust the rate ranges
the qualifications required by those duties and
established under §9701.321 on an annual basis. In
responsibilities. Each class is placed in its appropriate
determining the rate ranges, DHS and OPM may
grade on the basis of the level of difficulty,
consider mission requirements, labor market conditions,
responsibility, and qualification requirements of the work
availability of funds, pay adjustments received by
of the class.
employees of other federal agencies, and any other
relevant factors.
5 U.S.C. §5105. Standards for classification of
After coordination with OPM, DHS may determine the
positions
effective date of newly set or adjusted band rate ranges.
OPM, after consulting the agencies, prepares standards
Unless DHS determines that a different effective date is

CRS-33
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
for placing positions in their proper classes and grades.
needed for operational reasons, these adjustments will
OPM may make such inquiries or investigations of the
become effective on or about the date of the annual GS
duties, responsibilities, and qualification requirements of
pay adjustment.
positions as it considers necessary for this purpose. In
DHS may establish different rate ranges and provide
the standards, OPM defines the various classes of
different rate range adjustments for different bands.
positions in terms of duties, responsibilities, and
DHS may adjust the minimum and maximum rates of a
qualification requirements; establishes the official class
band by different percentages.
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. §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
5 U.S.C. §5336. Additional step-increases
with a rate range adjustment. When a band rate range
Authorizes within-grade pay adjustments for work at an
is adjusted under §9701.322, employees covered by that
acceptable level of competence (§5335) or for high
band are eligible for an individual pay increase. An
quality performance above that ordinarily found in the
employee who meets or exceeds performance
position (§5336).
expectations (i.e., has a rating of record above the
5 U.S.C. §5303. Annual adjustments to pay schedules
unacceptable performance level for the most recently
Authorizes annual pay adjustments. Effective as of the
completed appraisal period) must receive an increase in
first day of the first applicable pay period beginning on
basic pay equal to the percentage value of any increase in
or after January 1 of each calendar year, the rates of basic
the minimum rate of the employee’s band resulting from
pay for each statutory pay system are increased by the
a rate range adjustment under §9701.322. The pay
percentage equal to the Employment Cost Index for
increase takes effect at the same time as the
wages and salaries, private industry workers, minus
corresponding rate range adjustment, except as provided

CRS-34
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
0.5%, i.e., the September 2003 ECI is used for the
in §§9701.324 and 9701.325. For an employee receiving
January 2005 pay adjustment.
a retained rate, 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
§9701.324. Treatment of employees whose rate of
record may be changed within 60 days of issuance based
basic pay does not fall below the minimum rate of
upon an informal request by the employee; as a result of
their band. An employee who does not receive a pay
a grievance, complaint, or other formal proceeding
increase under §9701.323 because of an unacceptable
permitted by law or regulation that results in a final
rating of record and whose rate of basic pay does not fall
determination by appropriate authority that the rating of
below the minimum rate of his or her band as a result of
record must be changed or as part of a bona fide
that rating will receive such an increase if he or she
settlement of a formal proceeding; or where the agency
demonstrates performance that meets or exceeds
determines that a rating of record was incorrectly
performance expectations, as reflected by a new rating of
recorded or calculated.
record issued under §9701.409(b). Such an increase will
5 CFR §531.409 Acceptable level of competence
be made effective on the first day of the first pay period
determinations (the section generally and specifically:)
beginning on or after the date the new rating of record is
(c)(2)(i) When the determination of an acceptable level
issued.
of competence 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

CRS-35
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
5 U.S.C. §5304. Locality-based comparability payments
§9701.331. General. The basic pay ranges established
5 U.S.C. §5305. Special pay authority
under §§9701.321 through 9701.323 may be
supplemented in appropriate circumstances by locality or
special rate supplements, as described in §§9701.332

CRS-36
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
§9701.332. Locality rate supplements. For each band
payments
rate range, DHS may, after coordination with OPM,
Comparability payments are payable within each locality
establish locality rate supplements that apply in specified
determined to have a pay disparity greater than 5%.
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
5 U.S.C. §553. Rule making
comment provisions of 5 U.S.C. §553, publish
departmental regulations in the Federal Register 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 regarding the establishment or
adjustment of locality pay areas is limited to whether or

CRS-37
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
not the regulation was promulgated in accordance with 5
U.S.C. §553.
Locality payments are part of basic pay for purposes of
Locality rate supplements are considered basic pay for
retirement, life insurance, premium pay, and for such
retirement; life insurance; premium pay; severance pay;
other purposes as may be expressly provided for by law
application of the maximum rate limitation set forth in
or as OPM regulations may prescribe.
§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
Whenever the President finds that the government’s
coordination with OPM, establish special rate
recruitment or retention efforts with respect to one or
supplements that provide higher pay levels for
more occupations in one or more areas or locations are,
subcategories of employees within an occupational
or are likely to become significantly handicapped due to
cluster if DHS determines that such supplements are
specific circumstances, he may establish for the areas or
warranted by current or anticipated recruitment and/or
locations involved higher minimum rates of basic pay for
retention needs. DHS will issue necessary implementing
one or more grades or levels, occupational groups, series,
directives. Any special rate supplement must be treated
classes, or subdivisions thereof, and may make
as basic pay for the same purposes as locality rate
corresponding increases in all step rates of the pay range
supplements, as described in §9701.332(c), and for the
for each such grade or level. Circumstances justifying
purpose of computing cost-of-living allowances and post
special rates are rates of pay offered by non-federal
differentials in nonforeign areas under 5 U.S.C. §5941.
employees being significantly higher 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

CRS-38
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
undesirability of 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
§9701.334. Setting and adjusting locality and special
payments
rate supplements. Within its sole and exclusive
Authorizes the President to direct the Pay Agent to
discretion, DHS may, after coordination with OPM, set
prepare a report comparing General Schedule pay rates
and adjust locality and special rate supplements. In
with non-federal pay rates, as determined by surveys
determining the amounts of the supplements, DHS and
conducted by the Bureau of Labor Statistics. Based on
OPM may consider mission requirements, labor market
the data from the surveys, the Pay Agent identifies each
conditions, availability of funds, pay adjustments
locality in which a pay disparity exists, specifies the size
received by employees of other federal agencies, and any
of the pay disparity, and makes recommendations to the
other relevant factors.
President for appropriate comparability payments.
DHS may, after coordination with OPM, determine the
Comparability payments are paid in the same manner
effective date of newly set or adjusted locality and
and at the same time as basic pay is payable.
special rate supplements. Established supplements will
5 U.S.C. §5304a. Authority to fix an alternative level
be reviewed for possible adjustment on an annual basis
of comparability payments
in conjunction with rate range adjustments under
Authorizes the President to fix an alternative level of
§9701.322.
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

CRS-39
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
30% and no rate may be established in excess of basic
pay for Executive Schedule level V.
Generally, Title 5 rewards high performing employees
§9701.335. Eligibility for pay increase associated
through awards.
with a supplement adjustment. When a locality or
5 U.S.C. §4505a. Performance-based cash awards
special rate supplement is adjusted under §9701.334, an
An employee whose most recent performance rating was
employee to whom the supplement applies is entitled to
fully successful or higher may be paid a cash award
the pay increase resulting from that adjustment if he or
equal to an amount determined appropriate by the agency
she meets or exceeds performance expectations (i.e., has
head, but not more than 10% of the employee’s annual
a rating of record above the unacceptable performance
pay rate (not more than 20% for exceptional
level for the most recently completed appraisal period).
performance.
This includes an increase resulting from the initial
5 U.S.C. §4503. Agency awards
establishment and setting of a special rate supplement.
Authorizes an agency head to pay a cash award to an
The pay increase takes effect at the same time as the
employee who contributes to the efficiency, economy, or
applicable supplement is set or adjusted, except as
other improvement of government operations or achieves
provided in §§9701.336 and 9701.337.
a significant reduction in paperwork; or performs a
If an employee does not have a rating of record for the
special act or service in the public interest in connection
most recently completed appraisal period, he or she must
with or related to official employment.
be treated in the same manner as an employee who meets
5 U.S.C. §4504. Presidential awards
or exceeds performance expectations and is entitled to
Authorizes the President to pay a cash award to an
any pay increase associated with a supplement
employee who contributes to the efficiency, economy, or
adjustment.
other improvement of government operations or achieves
An employee who has an unacceptable rating of record
a significant reduction in paperwork; or performs an
may not receive a pay increase as a result of an increase
exceptionally meritorious special act or service in the
in an applicable locality or special rate supplement,
public interest in connection with or related to official
except as provided by §§9701.336 and 9701.337.
employment.
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
§9701.336. Treatment of employees whose pay does
record may be changed within 60 days of issuance based
not fall below the minimum adjusted rate of their
upon an informal request by the employee; as a result of
band. An employee who does not receive a pay increase

CRS-40
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
a grievance, complaint, or other formal proceeding
under §9701.335 because of an unacceptable rating of
permitted by law or regulation that results in a final
record and whose rate of basic pay (including a locality
determination by appropriate authority that the rating of
or special rate supplement) does not fall below the
record must be changed or as part of a bona fide
minimum adjusted rate of his or her band as a result of
settlement of a formal proceeding; or where the agency
that rating will receive such an increase if he or she
determines that a rating of record was incorrectly
demonstrates performance that meets or exceeds
recorded or calculated.
performance expectations, as reflected by a new rating of
5 CFR §531.409 Acceptable level of competence
record issued under §9701.409(b). Such an increase will
determinations (the section generally and specifically:)
be made effective on the first day of the first pay period
(c)(2)(i) When the determination of an acceptable level
beginning on or after the date the new rating of record is
of competence has been delayed for reasons including an
issued.
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

CRS-41
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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
5 U.S.C. §5336. Additional step-increases
9701.346 describe various types of performance-based
pay adjustments that are part of the pay system
5 U.S.C. §4505a. Performance-based cash awards
established under Subpart C. Generally, these within-
5 U.S.C. §4503. Agency awards
band pay increases are directly linked to an employee’s
5 U.S.C. §4504. Presidential awards
rating of record (as assigned under the performance
management system described in 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.
An employee whose most recent performance rating was
The DHS pay system provides employees in a Full
“fully successful” or higher may be paid a cash award.
Performance or higher band with increases in basic pay

CRS-42
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
5 U.S.C. §5335. Periodic step-increases
based on individual performance ratings of record as
5 U.S.C. §5336. Additional step-increases
assigned under a performance management system
Authorizes within-grade pay adjustments for work at an
established under Subpart D. The DHS pay system uses
acceptable level of competence (§5335) or for high
pay pool controls to allocate pay increases based on
quality performance above that ordinarily found in the
performance points that are directly linked to the
position (§5336).
employee’s rating of record, as described in this section.
Performance pay increases are a function of the amount
of money in the performance 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

CRS-43
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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, 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.

CRS-44
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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

CRS-45
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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 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
§9701.343. Within-band reductions. Subject to the
performance
adverse action procedures set forth in Subpart F, DHS
Authorizes an agency to reduce in grade or remove an
may reduce an employee’s rate of basic pay within a
employee for unacceptable performance.
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.

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. §5377. Pay authority for critical positions
§9701.344. Special within-band increases. DHS may
Authorizes OMB, in consultation with OPM, to, upon
issue implementing directives regarding special within-
the request of an agency head, grant authority to fix the
band basic pay increases for employees within a Full
basic pay rate for one or more positions in the agency in
Performance or higher band established under §9701.212
accordance with critical pay. OMB may not authorize
who possess exceptional skills in critical areas or who
the exercise of critical pay authority for more than 800
make exceptional contributions to mission
positions at any time, of which not more than 30 may at
accomplishment or in other circumstances determined by
any time be positions which would otherwise be paid on
DHS. Increases under this section are in addition to any
the Executive Schedule.
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
5 U.S.C. §5336. Additional step-increases
will issue implementing directives regarding pay
Authorizes within-grade pay adjustments for work at an
adjustments within the Entry/Developmental band.
acceptable level of competence (§5335) or for high
These directives may require employees to meet certain
quality performance above that ordinarily found in the
standardized assessment or certification points as part of
position (§5336).
a 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.
OPM administers the Federal Candidate Development
DHS will issue implementing directives requiring an
Program to train career employees for SES positions.
employee newly appointed to or selected for a
Upon certification by a performance review board that an
supervisory position to meet certain assessment or
employee has met the five executive core qualifications
certification points as part of a formal

CRS-47
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
for the SES, he or she may be selected for an SES
training/developmental program. In administering
position throughout the government.
performance pay increases for these employees under
§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
New appointments are made at the minimum rate of the
will, after coordination with OPM, issue implementing
appropriate grade. Appointments at above the minimum
directives regarding the starting rate of pay for an
rate may be made for such considerations as the existing
employee, including an individual who is newly
pay or unusually high or unique qualifications of the
appointed or reappointed to the federal service; an
candidate, or a special need of the government for the
employee transferring to DHS from another Federal
individual’s services.
agency; and a DHS employee who moves from a
noncovered position to a position already covered by
Subpart C.
5 CFR §531.203 General provisions. Discusses use of
§9701.352. Use of highest previous rate. DHS will
the highest previous rate, especially at (c)-(e). “Highest
issue implementing directives regarding the discretionary
previous rate” means the highest actual rate of basic pay
use of an individual’s highest previous rate of basic pay
previously received by an individual while employed in a
received as a federal employee or as an employee of a
position in a branch of the federal government
Coast Guard nonappropriated fund instrumentality
(executive, legislative, or judicial); a government
(NAFI) in setting pay upon reemployment, transfer,
corporation; the United States Postal Service or the
reassignment, promotion, demotion, placement in a
Postal Rate Commission; or the government of the
different occupational cluster, or change in type of
District of Columbia; without regard to whether the
appointment. For this purpose, basic pay may include a
position was subject to the General Schedule (GS); or the
locality-based payment or supplement under
actual rate of basic pay for the highest grade and step
circumstances approved by DHS. If an employee in a
previously held by an individual while employed in a
Coast Guard NAFI position is converted to an
position subject to the GS. [5 CFR 531.202]
appropriated fund position under the pay system
established under Subpart C, DHS must use the existing
NAFI rate to set pay upon conversion.

CRS-48
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
5 U.S.C. §5334. Rate on change of position or type of
§9701.353. Setting pay upon promotion. Except as
appointment; regulations
otherwise provided in this section, upon an employee’s
(b) Generally, an employee who is promoted or
promotion, DHS must provide an increase in the
transferred to a position in a higher grade is entitled to
employee’s rate of basic pay equal to at least 8%. The
basic pay at the lowest rate of the higher grade which
rate of basic pay after promotion may not be less than the
exceeds his existing rate of basic pay by not less than
minimum rate of the higher band.
two step-increases of the grade from which he is
DHS will issue implementing directives providing for an
promoted or transferred. Regulations are at 5 CFR
increase other than the amount specified above in the
§531.203 and 5 CFR §531.204.
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 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.

CRS-49
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
5 U.S.C. §5334. Rate on change of position or type of
§9701.354. Setting pay upon demotion. DHS will
appointment; regulations
issue implementing directives regarding how to set an
(a) The rate of basic pay to which an employee is entitled
employee’s pay when he or she is demoted. The
is governed by OPM regulations in conformity with
directives must distinguish between demotions under
Subchapter III of Chapter 53 and Chapter 51 when he is
adverse action procedures (as defined in Subpart F) and
... demoted to a position in a lower grade .... The
other demotions (e.g., due to expiration of a temporary
regulations are at [5 CFR §531.203(c)(d)].
promotion 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 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
§9701.356. Pay retention. Subject to the requirements
Retention
of this section, DHS will, after coordination with OPM,
5 U.S.C. §5362. Grade retention following a change
issue implementing directives regarding the application
of positions or reclassification
of pay retention. Pay retention prevents a reduction in
Generally, an employee whose position changes to one in
basic pay that would otherwise occur by preserving the
a lower grade is entitled to retain the higher grade for
former rate of basic pay within the employee’s new band
two years. Certain requirements stated in the law must
or by establishing a retained rate that exceeds the
be met for grade retention to occur.
maximum rate of the new band.
5 U.S.C. §5363. Pay retention
Pay retention must be based on the employee’s rate of
Generally, entitles an employee to basic pay at a rate
basic pay in effect immediately before the action that

CRS-50
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
equal to the employee’s allowable former rate of basic
would otherwise reduce the employee’s rate. A retained
pay, plus 50% of the amount of each increase in the
rate must be compared to the range of rates of basic pay
maximum rate of basic pay payable for the grade of the
applicable to the employee’s position.
employee’s position immediately after such reduction in
In applying §9701.323 (regarding pay increases provided
pay if such allowable former rate exceeds such maximum
at the time of a rate range adjustment under §9701.322),
rate for the grade. Certain requirements for pay retention
any increase in the rate of basic pay for an employee
are stated in the law.
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
New appointments are made at the minimum rate of the
employee who does not receive a pay increase under
appropriate grade. Appointments at above the minimum
§§9701.323 or 9701.335 because of an unacceptable
rate may be made for such considerations as the existing
rating of record, an employee’s rate of basic pay may not
pay or unusually high or unique qualifications of the
be less than the minimum rate of the employee’s band
candidate, or a special need of the government for the
(or the adjusted minimum rate of that band).
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.
5 U.S.C. §5504. Biweekly pay periods; computation of
DHS must follow the rules for establishing pay periods
pay
and computing rates of pay in 5 U.S.C. §§5504 and
5 U.S.C. §5505. Monthly pay periods; computation of
5505, as applicable. For employees covered by 5 U.S.C.
pay
§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

CRS-51
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
§9701.361. Special skills payments. DHS will issue
Enforcement Officers for Foreign Language Capabilities
implementing directives regarding additional payments
Authorizes cash awards of up to 5% of basic pay to
for specializations for which the incumbent is trained and
eligible law enforcement officers who possess and make
ready to perform at all times. DHS may determine the
substantial use of one or more foreign languages in the
amount of the payments and the conditions for
performance of official duties. An award is in addition
eligibility, including any performance or service
to basic pay.
agreement requirements. Payments may be made at the
5 U.S.C. Chapter 53, Subchapter IX — Special
same time as basic pay or in periodic lump-sum
Occupational Pay Systems
payments. Special skills payments are not basic pay for
5 U.S.C. §5392. Establishment of special
any purpose and may be terminated or reduced at any
occupational pay systems
time without triggering pay retention or adverse action
Authorizes the President’s pay agent to establish one or
procedures.
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
§9701.362. Special assignment payments. DHS will
hazardous duty differential
issue implementing directives regarding additional
(d) Authorizes a differential for duty involving unusual
payments for employees serving on special assignments
physical hardship or hazard.
in positions placing significantly greater demands on the
5 U.S.C. Chapter 59, Subchapter III — Overseas
employee than other assignments within the employee’s

CRS-52
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
Differentials and Allowances and Subchapter IV —
band. DHS may determine the amount of the payments
Miscellaneous Allowances
and the conditions for eligibility, including any
Authorizes a danger pay allowance and an allowance
performance or service agreement requirements.
based on duty at remote worksites.
Payments may be made at the same time as 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
5 U.S.C. §5754. Retention bonuses
implementing directives regarding additional payments
Authorize recruitment, relocation, and retention bonuses
for employees serving in positions for which DHS is
to eligible employees in positions likely to be difficult to
experiencing or anticipates significant recruitment and/or
fill or likely that essential employees would leave in the
retention problems. DHS may determine the amount of
absence of such bonuses. An employee receiving a
the payments and the conditions for eligibility, including
bonus must enter into a service agreement with the
any performance or service agreement requirements.
agency. Bonuses generally cannot exceed 25% of annual
Payments may be made at the same time as basic pay or
basic pay, but for a critical agency need, may be up to
in periodic lump-sum payments. Special staffing
50% of annual basic pay. A bonus may be paid as a
payments are not basic pay for any purpose and may be
lump sum and is not part of basic pay. Additionally,
terminated or reduced at any time without triggering pay
retention bonuses of up to 10% of annual basic pay may
retention or adverse action procedures.
be paid to a 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,”

CRS-53
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
“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).
5 U.S.C. §5541(3) defines “law enforcement officer”
For employees who are law enforcement officers as
(LEO) as an employee who is an LEO within the
defined in 5 U.S.C. §5541(3) and who were covered by
meaning of 5 U.S.C. §§8331(20) or 8401(17), which
the GS system immediately before conversion, the initial
define the term for purposes of federal retirement. The
ranges must provide rates of basic pay that equal or
law states other positions which meet the definition.
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

CRS-54
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
§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 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,

CRS-55
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
P.L. 107-71 (115 Stat. 597) established the
Marshal Service. Notwithstanding any other provision
Transportation Security Administration.
in Subpart C, if DHS 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
DHS Authority for Subpart D derives from 5 U.S.C.
§9701.401. Purpose. Provides for the establishment in
§9701 (a)-(c).
DHS of at least one performance management system.
5 U.S.C. §4302. Establishment of performance
The performance management system(s), working in
appraisal systems
conjunction with the pay system established under
Each agency must develop one or more performance
Subpart C, is designed to promote and sustain a high-
appraisal systems which provide for periodic appraisals
performance culture by: adhering to merit principles;
of job performance, encourage employee participation in
having a fair, credible, and transparent employee
establishing performance standards, and use the results
performance appraisal system; linking the pay and
of performance appraisals to train, reward, reassign,
performance appraisal systems with the DHS strategic
promote, reduce in grade, retain, and remove employees.
plan; involving employees in the design and
Under OPM regulations, each system must establish
implementation of the system; providing adequate
performance standards which will, to the maximum
training and retraining for supervisors, managers, and
extent feasible, permit the accurate evaluation of job
employees in implementing and operating the system;
performance on the basis of objective criteria (which
providing for periodic performance feedback and

CRS-56
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
may include courtesy demonstrated to the public) related
dialogue among supervisors, managers, and employees
to the job in question for each employee or position;
throughout the appraisal period, with specific timetables
communicate those standards and critical elements to
for review; having effective safeguards so that the
employees at the beginning of each appraisal period;
management of the system is fair and equitable and
evaluate each employee during the appraisal period on
based on employee performance; and providing a means
the standards; recognize and reward employees whose
for ensuring that adequate resources are allocated for the
performance warrants such; assist employees in
design, implementation, and administration of the
improving unacceptable performance; and reassign,
system.
reduce in grade, or remove employees who continue to
have 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
5 CFR §430.202 Coverage. (d) Agency requests for
Chapter 43 by OPM under 5 CFR §430.202(d) prior to
exclusions of positions in the excepted service.
the date of coverage under 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
5 U.S.C. Chapter 43 — Performance Appraisal
employees is covered by the performance management

CRS-57
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
5 CFR Part 430 — Performance Management
system(s) established under 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
“Appraisal” means the process under which performance
and evaluation of an employee’s performance.
is reviewed and evaluated.
“Appraisal period” means the established period of time
“Appraisal period” means the period of time established
for which performance will be reviewed and a rating of
under a performance management system for reviewing
record will be prepared.
employee performance.
“Critical element,” “Non-critical element,” and
“Competencies” means the measurable or observable
“Additional performance element” express the
knowledge, skills, abilities, behaviors, and other
objectives, goals, program plans, work plans, and the like
characteristics required by a position.
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 period” means the period of time established
minimum period of performance that must be completed
by DHS during which an employee must perform before
before a performance rating may be prepared. [5
receiving a rating of record.
CFR§430.207(a)]
“Performance” means accomplishment of work
“Performance” means accomplishment of work
assignments or responsibilities.
assignments or responsibilities.
“Performance standard” means the management-
“Performance expectations” means that which an
approved expression of the performance threshold(s),
employee is required to do, as described in §9701.406,
requirement(s), or expectation(s) that must be met to be
and may include observable or verifiable descriptions of
appraised at a particular level of performance. A
quality, quantity, timeliness, and cost effectiveness.
performance standard may include, but is not limited to,
quality, quantity, timeliness, and manner of performance.

CRS-58
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
“Appraisal” means the process under which performance
“Performance management” means applying the
is reviewed and evaluated.
integrated processes of 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
“Performance management system” means the policies
policies and parameters established by an agency for the
and requirements established under Subpart D, as
administration of performance appraisal programs under
supplemented by DHS implementing directives, for
5 U.S.C. Chapter 43, Subchapter I and 5 CFR Part 430,
setting and communicating employee performance
Subpart B.
expectations, monitoring performance and providing
feedback, developing performance and addressing poor
performance, and rating and rewarding performance.
“Rating of record” means the performance rating
“Rating of record” means a performance appraisal
prepared at the end of an appraisal period for
prepared at the end of an appraisal period covering an
performance of agency-assigned duties over the entire
employee’s performance of assigned duties over the
period and the assignment of a summary level within a
applicable period; or to support a pay determination,
pattern.
including one granted in accordance with Subpart C of
this part, a within-grade increase granted under 5 CFR
§531.404, or a pay determination granted under other
applicable rules.
“Unacceptable performance” means performance by an
“Unacceptable performance” means the failure to meet
employee which fails to meet established performance
one or more performance expectations.
standards in one or more critical elements of the
employee’s position. [5 U.S.C. §4301(3)]
5 CFR Part 430 — Performance Management contains
§9701.405. Performance management system
the regulations to implement 5 U.S.C. Chapter 43 —
requirements. DHS will issue implementing directives
Performance Appraisal, including regulations on agency
that establish one or more performance management

CRS-59
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
performance appraisal systems and programs, and
systems for DHS employees, subject to the requirements
planning, monitoring, and rating performance.
set forth in Subpart D.
5 U.S.C. Chapter 23 — Merit System Principles
Each DHS performance management system must:
Covers Merit system principles and Prohibited personnel
specify the employees covered; provide for the periodic
practices.
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; and addressing poor performance.
5 U.S.C. §4302. Establishment of performance
§9701.406. Setting and communicating performance
appraisal systems
expectations. Performance expectations must align with
(a) Each agency must develop one or more performance
and support the DHS mission and its strategic goals,
appraisal systems which (a)(2) encourage employee
organizational program and policy objectives, annual
participation in establishing performance standards.
performance plans, and other measures of performance.
(b) Each performance appraisal system must provide for
Such expectations include those general performance
(1) establishing performance standards which will, to the
expectations that apply to all employees, such as
maximum extent feasible, permit the accurate evaluation
standard operating procedures, handbooks, or other

CRS-60
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
of job performance on the basis of objective criteria
operating instructions and requirements associated with
(which may include courtesy demonstrated to the public)
the employee’s job, unit, or function.
related to the job in question for each employee or
Supervisors and managers must communicate
position; (2) communicating the performance standards
performance expectations, including those that may
and the critical elements of the employee’s position to
affect an employee’s retention in the job. Performance
the employee at the beginning of each appraisal period.
expectations need not be in writing, but must be
5 CFR §430.102 Performance management.
communicated to the employee prior to holding the
(a) Performance management is the systematic process
employee accountable for them. Employees are always
by which an agency involves its employees, as
accountable for demonstrating appropriate standards of
individuals and members of a group, in improving
conduct, behavior, and professionalism, such as civility
organizational effectiveness in the accomplishment of
and respect for others.
agency mission and goals.
Performance expectations may take the form of — goals
(b) Performance management integrates the processes an
or objectives that set general or specific performance
agency uses to (1) Communicate and clarify
targets at the individual, team, and/or organizational
organizational goals to employees; (2) Identify
level; organizational, occupational, or other work
individual and, where applicable, team accountability for
requirements, such as standard operating procedures,
accomplishing organizational goals.
operating instructions, administrative manuals, internal
5 CFR §430.206 Planning Performance.
rules and directives, and/or other instructions that are
(b) Performance plan. (1) Agencies shall encourage
generally applicable and available to the employee; a
employee participation in establishing performance
particular work assignment, including expectations
plans. (2) Performance plans shall be provided to
regarding the quality, quantity, accuracy, timeliness,
employees at the beginning of each appraisal period
and/or other expected characteristics of the completed
(normally within 30 days). (3) An appraisal program
assignment; competencies an employee is expected to
shall require that each employee be covered by an
demonstrate on the job, and/or the contributions an
appropriate written, or otherwise recorded, performance
employee is expected to make; or any other means, as
plan based on work assignments and responsibilities. (4)
long as it is reasonable to assume that the employee will
Each performance plan shall include all elements which
understand the performance that is expected.
are used in deriving and assigning a summary level,
Supervisors must involve employees, insofar as
including at least one critical element and any non-
practicable, in the development of their performance
critical element(s) .... (8) Elements and standards shall be
expectations. However, final decisions regarding
established as follows — For a critical element — At
performance expectations are within the sole and
least two levels for appraisal shall be used with one level
exclusive discretion of management.
being “Fully Successful” or its equivalent and another

CRS-61
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
(a) An appraisal program shall establish a minimum
feedback. In applying the requirements of the
period of performance that must be completed before a
performance management system and its implementing
performance rating may be prepared.
directives and policies, supervisors must monitor the
(b) An appraisal program shall include methods for
performance of their employees and the organization;
appraising each critical and non-critical element during
and provide timely periodic feedback to employees on
the appraisal period .... Ongoing appraisal methods shall
their actual performance with respect to their
include, but not be limited to, conducting one or more
performance expectations, including one or more interim
progress reviews during each appraisal period.
performance 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 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
(b) Performance management integrates the process an
poor performance. Subject to budgetary and other
agency uses to (3) Identify and address developmental
organizational constraints, a supervisor must provide
needs for individuals and where applicable teams.
employees with the proper tools and technology to do
5 U.S.C. §4302. Establishment of performance
their job and develop employees to enhance their ability
appraisal systems
to perform.

CRS-62
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
(b) Each performance appraisal system must provide for
During the appraisal period, if a supervisor determines
(5) assisting employees in improving unacceptable
that an employee’s performance is unacceptable, the
performance; and (6) reassigning, reducing in grade, or
supervisor must consider the range of options available
removing employees who continue to have unacceptable
to address the performance deficiency, such as remedial
performance, but only after an opportunity to
training, an improvement period, a reassignment, an oral
demonstrate acceptable performance.
warning, a letter of counseling, a written reprimand,
5 U.S.C. §4303. Actions based on unacceptable
and/or an adverse action; and take appropriate action to
performance
address the deficiency, taking into account the
Authorizes an agency to reduce in grade or remove an
circumstances, including the nature and gravity of the
employee for unacceptable performance.
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
(b) Performance plan. (8) Elements and standards shall
below, each DHS performance management system must
be established as follows — For a critical element — At
establish a single summary rating level of unacceptable
least two levels for appraisal shall be used with one level
performance, a summary rating level of fully successful
being “Fully Successful” or its equivalent and another
performance (or equivalent), and at least one summary
level being “Unacceptable;” and a performance standard
rating level above fully successful performance. For
shall be established at the “Fully Successful” level and
employees in an Entry/Developmental band, the DHS
may be established at other levels. For non-critical
performance management system(s) may establish two
elements, when established — At least two levels for
summary rating levels, i.e., an unacceptable rating level
appraisal shall be used, and a performance standard(s)
and a rating level of fully successful (or equivalent).
shall be established at whatever level(s) is appropriate.
At his or her sole and exclusive discretion, the Secretary,
5 CFR §430.208. Rating performance.
or designee may under extraordinary circumstances
(a) As soon as practicable after the end of the appraisal
establish a performance management system with two
period, a written, or otherwise recorded, rating of record
summary rating levels, i.e., an unacceptable level and a
shall be given to each employee.
higher rating level, for employees not in an
(b) (1) A level 1 summary (“Unacceptable”) shall be
Entry/Developmental band.
assigned if and only if performance on one or more
A supervisor or other rating official must prepare and
critical elements is appraised as “Unacceptable.”
issue a rating of record after the completion of the
(c) The method for deriving and assigning a summary
appraisal period. An additional rating of record may be
level may not limit or require the use of particular
issued to reflect a substantial change in the employee’s

CRS-63
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
summary levels (i.e., establish a forced distribution of
performance when appropriate. A rating of record will
summary levels). However, methods used to make
be used as a basis for determining an increase in basic
distinctions among employees or groups of employees
pay under §9701.342; a locality or special rate
such as comparing, categorizing, and ranking employees
supplement increase under §9701.336; a performance
or groups on the basis of their performance may be used
pay increase determination under §9701.342(a); a within-
for purposes other than assigning a summary level
grade increase determination under 5 CFR §531.404,
including, but not limited to, award determinations and
prior to conversion to the pay system established under
promotion decisions.
Subpart C; a pay determination under any other
(d) An appraisal program may use one of eight patterns
applicable pay rules; awards under any legal authority;
of summary rating levels. Level 1 is “Unacceptable,”
including 5 U.S.C. Chapter 45, 5 CFR Part 451, and a
Level 3 is “Fully Successful,” and Level 5 is
departmental or organizational awards program;
“Outstanding.” Additional requirements are listed in the
eligibility for promotion; or such other action that DHS
regulations.
considers appropriate, as specified in the implementing
5 U.S.C. §4302. Establishment of performance
directives.
appraisal systems
A rating of record must assess an employee’s
(a) Each agency must develop one or more performance
performance with respect to his or her performance
appraisal systems which (3) use the results of
expectations and/or relative contributions and is
performance appraisals to ... reward ... employees.
considered final when issued to the employee with all
(b) Each performance appraisal system must provide for
appropriate reviews and signatures.
(4) recognizing and rewarding employees whose
DHS may not impose a forced distribution or quota on
performance warrants such.
any rating level(s).
5 U.S.C. Chapter 45 — Incentive Awards
A rating of record issued under Subpart D is an official
5 U.S.C. §4505a. Performance-based cash awards
rating of record for the purpose of any provision of Title
An employee whose most recent performance rating was
5 CFR, for which an official rating of record is required.
“fully successful” or higher may be paid a cash award.
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

CRS-64
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
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
5 U.S.C. Chapter 35 — Retention Preference,
must comply with 5 U.S.C. Chapter 35 and 5 CFR
Restoration, and Reemployment
§351.504.
5 CFR §351.504 Credit for performance.
5 U.S.C. §4304. Responsibilities of the Office of
§9701.410. DHS responsibilities. In carrying out its
Personnel Management
performance management system(s), DHS must transfer
OPM must review each performance appraisal system
ratings between subordinate organizations and to other
developed by any agency and determine whether the
federal departments or agencies; evaluate its performance
performance appraisal systems meets the requirements of
management system(s) for effectiveness and compliance
5 U.S.C. Chapter 43, Subchapter I. OPM may direct that
with Subpart D, DHS implementing directives and
corrective action be taken if an agency performance
policies, and the provisions of 5 U.S.C. Chapter 23 that
system does not meet the requirements of Subchapter I.
set forth the merit system principles and prohibited
The Comptroller General from time to time must review
personnel practices; provide OPM with a copy of the
on a selected basis performance appraisal systems to
implementing directives, policies, and procedures that
determine the extent to which any such system meets the
implement Subpart D; and comply with 29 CFR

CRS-65
Current Law/Selected Regulations
Final DHS Regulations
Title 5 United States Code and
Title 5 Code of Federal Regulations
requirements of Subchapter I and must periodically
§1614.102(a)(5), which requires agencies to review,
report its findings to OPM and the Congress.
evaluate, and control managerial and supervisory
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.