MEMORANDUM FOR SEE DISTRIBUTION
SUBJECT: Clarification of Nonappropriated Fund (NAF) Personnel Incentive Awards Policy

References:

1. a. Nonappropriated Fund Personnel System Modernization (First Revision), HQDA, dated June 15, 1993 - Established the first revision in NAF modernization and pay band policy applying AR 215-3, Chapter 9, regulatory instruction on the application and limitations for Incentive Awards. This instruction is intended to replace Quality Step Increases for pay adjustments.
2. b. Unclas message 31234z January 1995, subject: Performance Based Pay Adjustments for Nonappropriated Fund (NAF) Pay Band Employees - Provided further guidance and clarification identifying that performance based pay adjustments must be documented on DA Form 5167-R and the term "pay adjustment" must be substituted for "Quality Step Increase."
3. c. AR 215-3, Chapter 9, dated October 10, 1990 - Sites regulatory instruction on the application of NAF Incentive Awards for all Army NAF employees.
4. d. Memorandum dated January 23, 1999, subject: DoD Policy on Recruitment, Retention, and Relocation - Provides the most recent authorities to assist management in the retention, recruitment and relocation of NAF employees.

Recently, there have been several inquiries regarding pay adjustments, Incentive Awards and the appropriate authorities and limitations for such pay. The following policy clarification is provided in order to assist commanders and managers in administering the pay band system equitably and economically.

Pay is authorized and may be fixed at any amount within the applicable pay level upon (except for conversion of positions as authorized by Portability of Benefits, P.L 101-508 as amended by P.L 104-106) appointment, reemployment, reinstatement reassignment within the same pay level, promotion, or transfer.

Cash awards are authorized for special acts or service. On-the-spot awards are authorized up to $500 with a maximum amount of $2,000 limit in a year.

Pay adjustments are authorized to recognize work performance based on recognition of any 12 months of continuous service sufficiently superior to deserve special recognition. This type performance based pay adjustment replaces the Quality Step Increase. The Sustained Superior Award may include a pay adjustment and/or a cash award. The limitation for a performance based pay adjustment or cash award is 15 percent of the employee's annual salary. No other pay adjustments for performance are authorized.

Supervisors may establish Management Incentive Plans that tie compensation directly to achievement of quantifiable financial results. Only those managers who have complete authority and responsibility for revenue generating category C activity, can be included. A cash incentive limitation of $25,000 in a 12-month period is authorized for these managers. Major Army command (MACOM) commanders must ensure that individual performance goals are properly established and truly reward only positive results.

Installations, in accordance with MACOM guidance, may also develop Profit Sharing Programs for employees in business activities.

Pay may also be increased for the purposes of employee retention, relocation and recruitment in accordance with reference d above.

These policies are currently in effect as part of the Army NAF modernization and pay banding program, and are contained in the new upcoming AR 215-3.

DISTRIBUTION:
COMMANDER

U.S. ARMY EUROPE AND SEVENTH ARMY, ATTN: AEAGA-CN
U.S. ARMY FORCES COMMAND, ATTN: AFPI-CP
U.S. ARMY MATERIEL COMMAND, ATTN: AMCPE-C
U.S. ARMY TEST AND EVALUATION COMMAND ATTN: CSTE-PR
U.S. ARMY TRAINING AND DOCTRINE COMMAND, ATTN: ATBO-C
U.S. ARMY MILITARY DISTRICT OF WASHINGTON, ATTN: ANCP-ZA
U.S. ARMY MEDICAL COMMAND, ATTN: MCPE-H
MILITARY TRAFFIC MANAGEMENT COMMAND, ATTN: MTPAL-HRC
U.S. ARMY PACIFIC COMMAND, ATTN: APPE-CP
U.S. ARMY SOUTH, ATTN: SOFB-PA
U.S. ARMY COMMUNITY AND FAMILY SUPPORT CENTER, ATTN: CFSC-ZA;
CFSC-HR; CFSC-MS
DA DEFENSE INTELLEGENCE AGENCY, ATTN: DAH-4
DOD STARS AND STRIPES PUBLISHER, ATTN: ROBERT TAYLOR
EIGHTH U.S. ARMY, ATTN: EAGA-CP

SUPERINTENDENT, U.S. MILITARY ACADEMY, ATTN: MACP DIRECTOR

DEFENSE LOGISTICS AGENCY, ATTN: CAHS

GENERAL MANAGER
DRAGON HILL LODGE
SHADES OF GREEN
HALE KOA HOTEL
AFRC-GARMISCH