These examples demonstrate the practical application of various laws, regulations, and Department policies.  All examples use 2003 rates of pay.

Table of Contents

• Example 1   Movement from a non-General Schedule (GS) pay system to a GS position


• Example 2   Change to a lower grade to enhance promotion prospects


• Example 3   Promotion and the highest previous rate rule


• Examples    involving special salary rates

Example 1
Movement from a non-General Schedule (GS) pay system to a GS position

Facts.  The Department selects an employee of the Department of State for a GS-11 non-law enforcement position in New York City.   The employee is currently assigned to Washington, DC in the Foreign Service pay system at Class 5, Step 10--an annual salary of $47,889 ($53,387 with locality pay).

Analysis.  Under OPM's regulations in 5 CFR 531.203, a non-GS Federal salary such as a Foreign Service salary may be used as a GS employee's highest previous rate.  This determination is made without regard to additional types of pay, such as locality pay.  After an employee's GS grade and step are determined, the appropriate locality payment is added (in this case, the New York payment of 15.23 percent).

Bottom Line.  Using OPM Salary Table 2003-GS, the maximum payable rate is GS-11, step 5 ($48,708). This is the lowest GS-11 rate that exceeds the employee's current basic rate of $47,889.  A 15.23 percent locality payment is then added for a maximum possible total salary of $56,126 (OPM Salary Table 2003-NY).

Reminder.  Under the Department's policy in Chapter 2-2 of the Human Resources Order, payment of the maximum payable rate is discretionary.  Therefore, Department policy allows components to set pay in this example at any GS-11 rate from step 1 to step 5.  However, if pay is set at a step below the maximum payable rate of GS-11, step 5, a brief statement setting forth the reasons for the determination is prepared and filed on the right side of the employee's Official Personnel Folder.  (If the employee is currently under a demonstration project, see the Note below .)

Example 2
Change to a lower grade to enhance promotion prospects

Facts.  A GS-12, step 3 employee earning $54,942 per year (all rates in this example exclude locality pay) applies for, and is selected for, a GS-11 position. The position has noncompetitive promotion potential to the GS-12 level.  The position is not hard to fill, and it is not part of a formal employee development program.  (Had the position been part of such a program, the pay retention provisions of 5 CFR 536.104(a)(6) may have applied.)  Had the change to a lower grade not occurred, the employee would have received a within-grade increase in late January 2003.

Analysis.  The Department's policy in Chapter 2-2 of the Human Resources Order covers this specific situation.   Under the policy, managers must consider "any windfall that could occur when the employee is promoted."  The requirement to consider the windfall does not limit management's discretion to pay the maximum payable rate if there are compelling reasons to do so--e.g., the position is exceptionally hard to fill.

Bottom Line.  Under OPM's regulations in 5 CFR 531.203, the employee's maximum payable rate is GS-11, step 10 ($55,873)--the lowest GS-11 rate that exceeds the employee's current rate of $54,942.  However, management realizes that if pay is set at this rate, the employee is likely to be promoted to GS-12, step 6 ($60,093) in one year--a rate two steps higher than the employee would have received if he or she had remained in the GS-12 position, and received a within-grade increase to step 4 ($56,659).

To prevent what it perceives as a potential windfall to the employee, management sets pay at GS-11, step 8 ($53,007) so that in one year, when the employee is likely to be promoted, the promotion rate would be GS-12, step 4 ($56,659).  This is the rate the employee would have received had he or she remained in the GS-12 position, and received a within-grade increase.  Because pay was set at a rate below the maximum payable rate of GS-11, step 10, a brief statement setting forth the reasons for the determination is prepared and filed on the right side of the employee's Official Personnel Folder.

Note:  Because the Department's policy does not require payment of the maximum payable rate, pay could have been set as low as GS-11, step 1.

Example 3
Promotion and the highest previous rate rule

Facts. A GS-11, step 10 employee in Washington, DC is being promoted to a GS-13 position in 2003.   The employee is eligible for promotion to GS-13 because of prior service in a GS-12 position. (In 2000, the employee had requested and received a downgrade from GS-12, step 5 to the current GS-11 position.)

Analysis. Under the two-step promotion rule (5 U.S.C. 5334(b)), the employee is entitled to two step increases added to the current salary GS-11, step 10 salary (using OPM Salary Table 2003-GS, the GS table without locality pay).

$55,873 + (2 X $1,433) = $58,739

Since this rate is less than the step 1 rate for the target grade of GS-13 ($61,251), the employee is entitled to $61,251.

Now, determine whether the agency has discretion to pay a higher rate under the highest previous rate rule. Under 5 CFR 531.203 and Chapter 2-2 of the Human Resources Order, compare the employee's 2000 GS-12, step 5 rate of $53,215 with the 2000 rates for GS-13 (on OPM Salary Table 2000-GS). Since the 2000 GS-13, step 1 rate of $55,837 was greater than the GS-12, step 5 rate, the employee does not benefit from the application of the highest previous rate rule. (In order to benefit, the employee's prior GS-12 rate would have had to be at least GS-12, step 7.)

Bottom Line. The employee's rate upon promotion is GS-13, step 1 ($61,251) plus the 11.48 percent DC locality pay rate, for a total salary of $68,283 (OPM Salary Table 2003-DC). There is no discretion to pay another rate.