Relocation Incentive

A relocation incentive is flexible compensation available to help Federal Agencies recruit and retain employees. A relocation incentive may be paid to an eligible individual who is appointed to a General Schedule (GS), Senior-Level (SL), scientific or professional (ST), Senior Executive Service (SES), Federal Bureau of Investigation and Drug Enforcement Administration (FBI/DEA) SES, Executive Schedule (EX), law enforcement officer (LEO), or prevailing rate position. The Office of Personnel Management (OPM) may approve other categories for coverage upon written request from the head of an executive Agency.

An Agency may pay a relocation incentive to a current employee who must relocate to accept a position in a different geographic area if the Agency determines that the position is likely to be difficult to fill in the absence of an incentive. The recipient must be employed by the Federal Government immediately before the relocation.

Service Agreement

Before receiving a relocation incentive, an employee must sign a written agreement with the Agency specifying the length, commencement, and termination dates. The service agreement must specify the following:

• relocation incentive percentage rate established for the employee,
• method and timing of incentive payments,
• conditions under which an agreement will be terminated by the Agency,
• Agency obligations if a service agreement is terminated (including the conditions under which the Agency must make an additional payment for partially completed service), and
• any other terms and conditions for receiving and retaining recruitment incentives.

An Agency may not commence a relocation incentive service agreement during a service period established by an employee’s recruitment or previously authorized relocation service agreement period. An Agency may commence a relocation incentive service agreement during a service period established by an employee’s previously authorized retention incentive service agreement with or without a service agreement.

The following guidelines apply to relocation incentives:

• Determination to pay a relocation incentive must be made before the employee enters on duty in the position at the new duty station.
• The employee receiving the relocation incentive must have a rating of record under an official performance appraisal or evaluation system of at least Fully Successful or equivalent.
• The employee receiving the relocation incentive must establish a residence in the new geographic location (50 or more miles from the worksite of the position held immediately before the move). An authorized Agency official may waive the 50-mile requirement and pay the employee a relocation incentive.
• The employee receiving the relocation incentive must maintain a residence in the new geographic location for the duration of the service agreement.
• Periodically throughout the service agreement, employees may be required to provide proof of residence. Examples of proof of residence include a lease, proof of purchasing property, utility bill, or a similar document to ensure the employee still resides in the new location.
• The relocation incentive is computed based on the employee’s adjusted salary.
• For employees on pay retention (J, K, U, V, 3, or R), the adjusted salary is not used in the computation. For these employees, the relocation incentive is computed using step 10 of the employee’s current grade on the locality pay table or the special salary rate table, whichever is higher.
• The relocation incentive may not exceed 25 percent of an employee’s adjusted salary including locality pay or special rate supplement in effect at the beginning of the service agreement period multiplied by the number of years in the service agreement period (not to exceed 4 years).
• With OPM approval, the payment may be increased not to exceed 50 percent of the employee’s adjusted salary including locality pay or special rate supplement at the beginning of the service agreement period multiplied by the number of years in the service agreement period.
• Under no circumstances may the total recruitment incentive received exceed 100 percent of the employee’s adjusted salary at the beginning of the service agreement period.
• The relocation incentive may be paid as:
  • lump-sum payment at the beginning of the service agreement period,
  • in installments throughout the service agreement period,
  • as a final lump-sum payment upon completion of the service agreement period, or
  • in a combination of these methods.
• Presidential appointees (except career SES appointees); noncareer appointees in the SES; those in positions excepted from the competitive service by reason of their confidential, policy-determining, policy-making, or policy-advocating natures; Agency heads; those expected to receive an appointment as an Agency head; or SES-limited term appointees or SES-limited emergency appointees when the appointment must be cleared through the White House Office of Presidential Personnel, are not eligible to receive a relocation incentive.
• Payment of a relocation incentive is subject to the aggregate limitation on pay under Title 5.

Personnel Document Processing Instructions

Following is OPM guidance for processing a relocation incentive using Nature of Action
Code (NOAC) 816, Relocation Incentive:

Payment	Authority Code	Authority
Payment is 25 percent or less.	VPF	5 USC 5753
Payment is above 25 percent.	VPO	5 USC 5753(e)
Payment is terminated.	VPW	Agency must cite the law, Executive Order, or regulation that authorizes the action.

The relocation (NOAC 816) personnel action generates a one-time, lump-sum payment. Agencies that wish to pay in other increments must process the NOAC 816 for the total amount with the Remark Code 288, HR Use Only - Retro Payment, and/or Re-Validation Suppressed, to document the incentive. The Agency must then process actual payouts via the Web-based Special Payroll Processing System (SPPS Web).

When an Agency receives OPM approval to waive the 25-percent maximum for Relocation (NOAC 816, Relocation Incentive), and pay a lump sum not to exceed 50 percent (and no more than 100 percent) of the employee’s salary, process NOAC 816 without the Remark Code 288. When the action processes through Personnel Input and Edit System (PINE), the user will receive PINE Error Message 399, Relocation Bonus Less/Greater Maximum Allowed. Enter override code C to bypass the PINE error.

Termination of a Service Agreement

Per OPM guidance:

• Discretionary. An Agency may unilaterally terminate a relocation incentive service agreement based solely on the management needs of the Agency, in which case the employee is entitled to relocation incentive payments attributable to completed service and to retain any incentive payments already received that are attributable to uncompleted service.
• Mandatory. An Agency must terminate a service agreement if an employee is demoted or separated for cause (e.g., for unacceptable performance or conduct), receives a rating of record lower than Fully Successful or equivalent during the service period, fails to maintain a residence at the new geographic location for the duration of the service agreement, or otherwise fails to fulfill the terms of the service agreement. In such cases:
  • The employee may retain any relocation incentive payments attributable to completed service but must repay any portion of the incentive attributable to uncompleted service.
  • The Agency is not obligated to pay the employee any outstanding incentive payment attributable to completed service unless such payment was required under the terms of the relocation incentive service agreement.
  • The full amount of the authorized relocation incentive must be prorated across the length of the service period to determine the amount attributable to completed service and uncompleted service.

Deleting/Modifying a Relocation Incentive in Current Processing Pay Period

In the event an incentive agreement is terminated or changed in the pay period it was processed, the Agency must process a rollback prior to the processing of the Payroll Computation System (PAYE) for the current processing pay period to delete the incentive award personnel action from the employee's personnel history or to modify the amount of the award payment. If the Agency submitted the SPPS Web request to pay the incentive, the Agency must submit an SPPS Web request to terminate or change the incentive.

Canceling an Incentive

If the incentive agreement is terminated after the processing of PAYE for the current processing pay period, Agencies must process a cancellation incentive personnel action in the applicable entry application (EmpowHR or Web-based Entry, Processing, Inquiry, and Correction System (EPIC Web)) during a subsequent pay period to correct the employee's personnel history.

Agencies must also submit an SPPS Web request to stop any payments to the employee and establish a debt for any incentive payments the employee must return/repay to the Agency.

Correcting an Incentive

If the incentive agreement is changed after the processing of PAYE for the current processing pay period, Agencies must process a correction incentive personnel action in the applicable entry system (EmpowHR or EPIC Web) during a subsequent pay period to correct the employee's personnel history.

Agencies must also submit an SPPS Web request to adjust any future payments to the employee and/or establish a debt for any incentive payments the employee must return/repay to the Agency.

SPPS Web Processing

The Agency should submit an SPPS Web request for each relocation incentive they will be paying, to include applicable transaction codes (TC) and which withholdings should be withheld.

The SPPS Web procedure includes additional information on these payments. 

1. To Search for a transaction in SPPS Web, on the SPPS Web Main Menu, select Adjustment List. The Adjustment list page is displayed.

2. Complete the applicable fields on the Adjustment List page.

3. After completing the fields, select Search. If any transactions have been processed for the employee based on the search criteria, they are displayed. The Status Code field (Status) on the Adjustment List page indicates the status of transactions during the current processing period.
   OR
   If no transaction is found, the message No documents found for search criteria, will display.

Note: A transaction must be established in SPPS Web before the requested change may be implemented.

Note: If the search does not return the specified transaction, the transaction must be established before the payment or adjustment record may be processed.

4. Select the Social Security number (SSN) for the transaction that is to be adjusted by double clicking the SSN. The Miscellaneous Payment page is displayed.
5. Complete the applicable fields on the Miscellaneous Payment page.
6. After completing all functions, select Save to apply all changes and update the record.
7. Select OK.

Note: Accounting must validate against Management Accounting Structure Codes System if stored accounting is to be used. Select Copy to copy stored accounting information from one pay period record to the pay period record being processed.

Tax Withholding

The gross amount of the incentive award is recorded as supplemental income to the employee, which results in deductions for Federal Insurance Contributions Act (FICA), Medicare, Federal, State, and local income taxes. The employment tax withholding due on supplemental wages is calculated under the flat rate method.

• The correct amount of Federal income tax withholdings is calculated by taking 28 percent of the supplemental wages.
• State taxes are calculated based on the employee's current withholdings.
• Social Security tax and Medicare tax withholdings are calculated at the usual rates and are in addition to the 28 percent Federal income tax withholding.

Reporting to OPM

Agencies are required to report annually to OPM on their use of the relocation incentive authority. Before March 31 of each year, Agencies must submit their reports for the previous calendar year. The report must contain the following information:

• Number of employees who received relocation incentives.
• Job classifications of the employees who received relocation incentive benefits.
• Cost to the Federal Government of providing relocation benefits.
• The Agency to which each employee would be likely transfer to in the absence of a retention incentive.
• Each employee's official worksite and the geographic location of the Agency to which each employee would be likely transfer to in the absence of a retention incentive; and
• Other information, records, reports, and data as OPM may require.

Note: To assist Agencies with reporting, SPPS Web includes a Relocation Incentive report identifying relocation incentive payment transactions.