PERMISS

Biweekly and Annual Limitation on Premium Pay

The Principal Deputy Under Secretary of Defense (Personnel and Readiness) on January 22, 2003, delegated authority to waive application of the biweekly limitation on premium pay for employees performing work critical to the agency. This authority is provided under 5 CFR 550.106, as amended by Public Law 107-107. It is discretionary and separate from the annual limitation applicable to premium pay for work performed in connection with an emergency or its aftermath.


Authority to waive the biweekly premium pay limitation may be exercised by officials to whom personnel appointing authority has been delegated, normally activity commanders or equivalent, and is subject to controls issued by major Army commanders or heads of independent reporting activities. When the biweekly limitation is waived, employees will be subject to the annual limitation on premium pay. Notwithstanding, premium payments listed in 5 CFR 550.107 remain capped on a biweekly basis.


Employees may receive premium pay only to the extent that the payment does not cause their total basic pay and premium pay to exceed the greater of the maximum rate of basic pay for the GS-15 grade level, including any locality adjustment or applicable special salary rate, or pay rate for level V of the Executive Schedule.


When the biweekly limitation is waived, a letter (on letterhead) from the commander is required by the Defense Finance and Accounting Service (DFAS). The letter should include the employee's name, SSN, specific mission (i.e., Enduring Freedom or other appropriate mission), effective date, and end date if temporary. If the entitlement is temporary and a termination date is provided, DFAS will automatically terminate the entitlement on the end date. No other action would be necessary by the submitting command. If more than one employee is entitled, one letter may be submitted to cover all of the employees. The letter should be imaged to the appropriate DFAS office via fax.


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The following Questions and Answers were provided by the Civilian Personnel Management Service on July 23, 1996. The information is still accurate.


Question 1. Can an employee be required to perform duties without compensation, for example overtime work by a GS-15 step 10 employee?


Answer 1. Yes, an employee may be required to work even though additional compensation is barred by the limitation on premium pay established under 5 U.S.C. 5547. Section 6101 of title 5 provides for the establishment of work schedules and additional guidance on the scheduling of work is provided by Title 5, Code of Federal Regulations, Part 610, subpart A. Neither referenced section of the law or the regulation limits authority to assign work to accommodate limitations imposed by 5 U.S.C. 5547. Under those circumstances, the employee is not working without compensation, rather he or she is working without additional compensation. Employees at the top of the GS-15 salary scale are considered to be appropriately compensated for work ordered and performed when the entitlement is computed in accordance with 5 U.S.C. Chapter 55, Subchapter V, including restrictions on premium pay.


Question 2. In applying the limit imposed by subsection (b)(2), is the Agency required to project the employee's pay through the end of the year and curtail the payment of premium pay at the time we determine that the aggregate of the basic pay and premium pay already paid and projected basic pay for the rest of the year equals the maximum rate for a GS-15?


Answer 2. Yes, when contemplating additional premium pay for an employee, the agency must project that employee's pay through the end of the calendar year. The restriction imposed by 5547(b)(2) is placed on payment to the employee; "no employee may be paid premium pay" Therefore, when an employee is approaching the limitation, the agency must project the aggregate of the employee's basic pay and premium pay through the end of the calendar year to ensure that the amount paid will not exceed the maximum rate payable for GS-15.


Question 3. If we are not required to project the employee's pay, what happens at the end of the year when the simple receipt of basic pay for the last pay period will cause the aggregate of the employee's basic pay and previously paid premium pay to exceed the maximum rate for a GS-15? Are we required to furlough the employee? May the employee elect leave without pay? If mission requires the continuing services of the employee, does the employee then serve without any compensation, even basic pay? Alternatively, do we interpret the statute narrowly as applying only to the payment of premium pay, continue to pay the employee his/her basic pay, and determine that the earlier paid premium pay was an erroneous payment appropriate for debt collection or waiver?


Answer 3. If the annual limitation on premium pay under 5 U.S.C. 5547(b)(2) is applied instead of the biweekly cap, and the compensation received by the employee accruing from basic pay and premium pay exceeds the maximum rate of GS-15 grade level, the employee is overpaid. The resulting debt must be either waived or collected, as provided by 5 U.S.C. 5584. The employee should not be furloughed and should continue to receive basic pay. The employee may elect to take leave without pay but such leave would have no affect on the indebtedness that resulted from the erroneous payment of premium pay.


Question 4. If we are required to project the employee's pay and we have done so accurately and the aggregate of premium pay received and basic pay received or projected equals the maximum rate for a GS-15, what happens if the employee is subsequently awarded a quality step increase (QSI)? Must the employee be denied the benefits of the QSI for the remainder of the year?


Answer 4. If an event occurs which changes projected salary levels, such as approval of QSI, an overpayment will occur. However, because the approval of a QSI is discretionary, the impact on the employee's aggregate basic and premium pay for the calendar year can be calculated prior to approval. Thus, an overpayment can be avoided by delaying the QSI or, if possible, using an alternative method to recognize outstanding performance.


Question 5. If we are required to project the employee's pay, may we consider an employee's statement that he/she intends to separate from Government service before the end of the year? If yes, what happens if the employee reconsiders and subsequently decides to remain in Government service?


Answer 5. An overpayment could arise if maximum payments were authorized based on projected separation from Federal service and the separation did not take place as anticipated. However, the intent of the statute is to ensure that an employee is not overcompensated. Therefore, projections should be compared to the maximum amount payable through the date the employee intends to separate.



Question 6. If we are required to project the employee's pay and we have accurately done so and the aggregate of his/her premium pay received and basic pay, including locality pay, received or projected equals the maximum rate for a GS-15, what happens if the employee is transferred to a locality which has a lower locality pay rate in effect at the end of the year?


Answer 6. An overpayment could arise if salary projections were based on employment in an area with a high locality rate and the employee subsequently transfers to an area with a lower locality rate. No overpayment would be created, however, if the employee's aggregate pay for the period of employment in the high locality area did not exceed the maximum pay for a GS-15 in that area during the corresponding period.


Question 7. Finally, are we correct in applying the calendar year limitation to the days on which pay is earned by the employee rather than the dates on which pay is received by the employee?


Answer 7. Yes, you are correct in applying the calendar year limitation to the amount the employee earns during the calendar year, rather than to the amount the employee actually receives during that calendar year. The language in 5 U.S.C. 5546 clearly indicates that the issue for consideration is the "aggregate rate of pay for any pay period".


Content last reviewed: 5/30/2006-RJM

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This page was last revised: 12/5/2011