Agencies have authority to design extensive employee awards programs that include cash awards, honorary awards, informal recognition awards, and time-off awards. Agencies can give these awards to employees to recognize employee and group performance, and can design incentive programs with awards granted because an individual or a group achieved pre-established goals.

Cash awards and bonuses do not increase an employee’s basic pay for purposes of retirement, life insurance, pay retention and Thrift Savings Plan benefits, although quality step increases do. Award payments are subject to the limitations on total pay – See Pay Limits.

For employees below senior levels, OMB memo M-19-24 of 2019 instructed agencies to allocate performance-based awards “in a manner that provides meaningfully greater rewards to top performers” while setting standards for assigning ratings that are used for determining performance awards and for other purposes. For career SES members and certain employees at a similar level, memo M-16-22 of 2016 limits awards to 7.5 percent of aggregate salaries for such positions and similarly tells agencies to concentrate performance-based awards on top performers. The memos are at

Actual spending for awards depends on the funds available for that purpose in agency budgets, which may be limited by the agency itself or by Congress.

OPM award regulations allow the following:

Performance-based cash awards

Agencies have discretionary authority to grant an employee a lump-sum cash award based on a “fully successful” or better rating of record. Agencies must ensure that rating-based awards granted make meaningful distinctions based on levels of performance. Awards based on the rating of record can be up to 10 percent of salary, or up to 20 percent for exceptional performance. (5 U.S.C. 4302, 4503, 4505a; 5 CFR 451.104)

Senior Executive Service members are eligible for performance bonuses of up to 20 percent of base pay.

Other cash employee awards

Agencies may grant a cash award to an employee, individually or as a member of a group, in recognition of accomplishments that contribute to the efficiency, economy, or other improvement of government operations. Agencies may grant up to $10,000 without external approval, up to $25,000 with OPM approval, and in excess of $25,000 with Presidential approval. (The Department of Defense and the Internal Revenue Service do not require OPM approval for awards up to $25,000, but the President must approve awards over $25,000 after review and approval by OPM.) (5 U.S.C. 45; 5 CFR 451 and 5 U.S.C. 5307(d); 5 CFR 530, subpart B)

Referral bonuses

Federal agencies can use the incentive awards authority under chapter 45, Title 5, U.S. Code, to provide incentives or recognition to employees who bring new talent into the agency, usually by establishing a specific award such as a referral bonus. Each agency must determine whether the use of referral bonuses is appropriate and establish criteria for giving them to employees. These incentive programs must not violate legal requirements for broad public awareness of job openings; recruitment from appropriate sources to seek a workforce drawn from all segments of society; and hiring selections based solely on relative ability, knowledge, and skills after a fair and open competition that assures all candidates receive equal opportunity. (5 U.S.C. 2301 (b) (1), (b) (2); 5 CFR 2.1 (a), 4.2, 451.106) Also see Referral Bonuses here.

Quality step increases

Agencies have discretionary authority to accelerate an employee’s advancement through the steps of his or her general schedule grade by granting a quality step increase. A quality step increase is an additional step increase agencies may grant to an employee who has received the highest rating of record available under the applicable performance appraisal program, which would be “outstanding” or Level 5 if such a level is available, and has met the agency-developed additional criteria required for programs that do not use a Level 5 summary. Agencies can grant no more than one quality step increase to an employee within a 52-week period, and such an increase may not cause the employee’s pay to exceed the maximum rate of the grade. There is no authority to grant quality step increases to wage system employees. (5 U.S.C. 5336; 5 CFR 531, subpart E) Also see Within-Grade Increases.

Honorary and informal recognition awards

Agencies can develop honorary and informal recognition programs that use recognition items as awards to recognize individual and group performance. Recognition items must meet certain criteria. Honorary awards: a) must be something the recipient could reasonably be expected to value, but not something which conveys a sense of monetary value; b) must have a lasting trophy value; c) must clearly symbolize the employer-employee relationship in some fashion; and d) must take an appropriate form to be used in the public sector and to be purchased with public funds. (5 U.S.C. 4503; 5 CFR 451.104(a)) Informal recognition awards: a) must be of nominal value; and b) must take an appropriate form to be used in the public sector and to be purchased with public funds. (5 U.S.C. 4503; 5 CFR 451.104(a))

Time off awards

Agencies may grant time off from duty without charge to leave or loss of pay as an award to individuals or groups of employees. (5 U.S.C. 4502; 5 CFR 451).

Rank awards

Career senior executives are eligible for the annual Presidential Rank Award. There are two categories of awards, Distinguished Executives and Meritorious Executives; the awards are lump-sum payments of 35 and 20 percent of base salary, respectively. Award winners are chosen through a process which includes nomination by their agency heads, evaluation by boards of private citizens, and approval by the President. Senior level and senior scientific-and technical employees are eligible for similar awards.