Grade and Pay Retention

Employees whose grade or pay would otherwise be reduced as a result of an involuntary personnel action or other personnel action determined to be in the best interest of the Government, in some cases may have their grade or pay retained.

The Civil Service Reform Act of 1978 (Title VIII of Public Law 95-454) provides that an employee who is placed in a lower grade as a result of reduction in force procedures or whose position is reduced in grade as a result of reclassification of the position, is entitled to retain for a period of 2 years the grade held immediately before that placement or reduction. Federal rules governing the use of retained grade and pay are contained in Title 5, Code of Federal Regulations, Part 536.

Department of Defense Instruction (DoDI) Number 1400.25, Volume 536 prescribes the application of grade and pay retention to General Schedule and Federal Wage System employees within the Department of Defense. The criteria and conditions contained in the DoDI apply within the Department of the Army. This guide may be viewed by clicking on the title in the Reference Section below.

In describing actions covered by the grade and pay retention rules, the DoD guidance states that grade and pay retention may be granted for, " personnel actions initiated by management, other than for cause, to further the agency’s mission in accordance with applicable law and regulation.” Within the Department of the Army, authority to extend grade and pay retention under this provision was delegated to ACOM, ASCC, and DRU commanders and the AASA, who may redelegate it to subordinate commanders or civilian activity heads (Matrix of ASA(M&RA) Delegated Civilian Human Resources (CHR) Authorities). When this authority is exercised, records will be maintained on-site to document the action.

Section 301 of the Federal Workforce Flexibility Act of 2004 (Public Law 108-411, October 30, 2004) contains the following provisions:

  • A locality rate may not be paid on top of a retained rate.
  • Reduction in the rate of basic pay resulting from a geographic change in official work site is not a basis for pay retention.
  • A retained rate is established based on an employee's highest payable rate of basic pay (including any locality payment or special rate supplement) compared to the employee's highest applicable rate range.
  • At the time of a schedule adjustment, a retained rate is increased by an amount equal to 50% of the increase in the maximum rate of the highest applicable rate range.
  • Pay retention rules apply to an employee with a retained grade in the same manner as those rules apply to other employees.

On October 28, 2009, the authority for the Department of Defense's (DOD) National Security Personnel System was repealed by section 1113 of the National Defense Authorization Act of FY 2010 (Public Law 111-84). Section 1113(c)(1) requires DOD to convert NSPS employees to the pay system that last applied or would have applied to the employees' positions if not for NSPS, and provides that under no circumstances should an NSPS employee's rate of pay be reduced due to the termination of NSPS. Most GS pay-setting rules applied to NSPS employees when they converted into the GS system, including the pay retention rules described in this article. Additionally, the protection of section 1113(c)(1) allows NSPS employees to retain a rate that is higher than the GS pay retention limitations found under 5 CFR 536.304(b)(3)— i.e., higher than 150 percent of the applicable step 10 rate of pay for the employee's grade or the rate for level IV of the Executive Schedule (EX). OPM published a fact sheet (Pay Retention For Former Employees Of The Department Of Defense National Security Personnel System (NSPS)) describing how pay retention is applied when employees transitioned out of NSPS with a retained rate of pay. This fact sheet may be viewed by clicking on the title in the Reference Section below.

Content last reviewed: 3/6/2012-JAD

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This page was last revised: 3/7/2012