MEMORANDUM FOR HUMAN RESOURCES DIRECTORS 
From: 
HENRY ROMERO
ASSOCIATE DIRECTOR FOR WORKFORCE COMPENSATION AND PERFORMANCE

Subject: 
Calculating Rates of Basic Pay for Certain GM Employees Who Receive Special Salary Rates 
Agency human resources officials have called our attention to a problem involving the calculation of the underlying rates of basic pay (and the corresponding locality rates of pay) for a small number of GM employees. The only employees potentially affected by this problem are employees at grades GM13, 14, and 15 who are covered by special rate table 0558 (Air Force Reserves and Air National Guard pilots) and employees at grade GM13 who are covered by special rate tables 999BF (information technology workers). This memorandum provides guidance on how to calculate pay rates correctly for this small group of employees.
Background
GM employees are employed only at grades 13 through 15 of the General Schedule (GS). They were covered by the Performance Management and Recognition System when it was terminated in 1993, and they remain covered by the GM pay plan code. (See 5 CFR 531.202 and 531.203(g).) As GM employees, their rate of basic pay does not have to be set at one of the fixed step rates for their grade, but may be set at any dollar rate. The Office of Personnel Management's (OPM's) regulations provide detailed rules for applying the annual acrosstheboard GS pay increase to GM rates. (See 5 CFR 531.205(a)(2).) These rules are designed to ensure that the employee's new GM rate retains the same relative position in the rate range as the old GM rate.
GM employees may be covered by special salary rates. When a special rate schedule is established or increased, GM employees' new special rates are calculated under the same rules used to apply the annual acrosstheboard GS pay increase. (See 5 CFR 531.306(a)(3), which requires use of the rules in 5 CFR 531.205(a)(2).)
Under the traditional approach for designing special rate schedules, a fixed dollar amount is added to each GS step rate of the grade for which special rates are established. Thus, the special rate schedule is built using the same withingrade increase dollar amounts as the regular General Schedule. In contrast, the special rate schedules cited above were constructed by increasing each GS step rate by a fixed percentage (parallel to the way locality payments are calculated). This means that the withingrade increases in these special rate schedules are larger than the regular GS withingrade increases for the corresponding GS grade. As a result, the rate range for each grade under these special rate schedules is larger (in dollar terms) than the rate range for the corresponding GS grade.
The Problem
For GM employees who are receiving special rates, the GM rate of basic pay is used only for limited purposes, such as calculating locality payments and applying the maximum payable rate rule. For locality pay and law enforcement officer (LEO) geographic adjustment purposes, the rate of basic pay used to calculate locality and LEO geographic payments is referred to as a "scheduled annual rate of pay." (See 5 CFR 531.602 and 531.301.) OPM regulations provide that the scheduled annual rate of pay for GM employees is calculated by (1) finding the difference between the employee's GM special rate and the step 1 special rate for the applicable grade and (2) adding that difference to the step 1 GS rate for the applicable grade.
In most cases, this rule works perfectly well as a shortcut method for determining an employee's new GM rate of basic pay without having to follow the more detailed method prescribed in 5 CFR 531.205(a)(2). This shortcut, however, was designed specifically for special rate schedules constructed by using the traditional fixeddollar withingrade increase approach. The shortcut method therefore does not provide the correct GM rate of basic pay when the employee is covered by a special rate schedule for which the special rates were set by increasing the GS rates by a fixed percentage amount at each grade. If your payroll system relied on this shortcut method for GM employees under tables 0558 and 999BF, it will have generated an incorrect GM rate of basic pay and incorrect locality or LEO geographic payments. These incorrect rates will be higher than the correct rates. In the case of a GM employee at step 10, for example, the incorrect rates would exceed the maximum GS and locality rates.
How to Correct the Problem
Rates constructed by using the shortcut method must be corrected. We encourage agencies to make appropriate use of their waiver authority under 5 U.S.C. 5584 in dealing with any overpayments resulting from use of the shortcut method.
Agencies must calculate the correct GM rate of basic pay for affected employees by using the more detailed method in 5 CFR 531.205(a)(2). For example, in the case of any GM13 employee covered by the information technology special rates (tables 999BF), follow the following steps to apply the detailed method and compute the correct GM unadjusted rate of basic pay in effect at the beginning of the first pay period in January 2001:
 Derive the relativeposition factor (using steps AC of the formula in 5 CFR 531.205(a)(2), considering only unadjusted rates of basic pay).
 Multiply that factor by the difference between the GS13, step 10, and the GS13, step 1, unadjusted GS rates for 2001.
 Add the result to the unadjusted GS step 1 rate to derive the correct GM unadjusted rate of basic pay. That rate will have the same relative position in the rate range as the employee's GM unadjusted rate of basic pay before the special rate increase.
We issued an example of a pay calculation for a GM13 employee covered by table 999C in an attachment to our December 26, 2000, memorandum for agency human resources directors about the January 2001 pay adjustments (CPM 200019). Example 8b followed the shortcut rule and was incorrect. We have attached a corrected example 8b to this memorandum, along with a copy of the original example 8a.
We sincerely apologize for any confusion caused by our failure to identify this problem sooner. Please let us know if we can provide any assistance to you in calculating the appropriate rate of pay for any affected employee. You may contact our Pay and Leave Administration Division by calling (202) 6062858 or by email at payleave@opm.gov.
Attachment
Examples of GM 2001 Pay Computations Who Receive Special Salary Rates
8a. GM employee at grade GS13 on the IT special rate schedule
IT Special Rate Conversion Basic Rate for GS33413, step 00 (not on step):$71,000 (December 2000) Location: WashingtonBaltimore, DCMDVAWV IT Special Rate: Table 999C
2000 Locality Rate: $77,426 ($71,000 x 1.0905)
Reference: 5 CFR 530.306(a)(3) and 531.205(a)(2)

Step 1: Subtract the GS13, step 1, rate from the employees basic rate in 2000. (Use the 2000 GS basic schedule). 
2000 GM basic rate
2000 GS basic rate
Difference 
$71,000
$55,837
$15,163 
($71,000  $55,837)

Step 2: Subtract the GS13, step 1, rate from the GS13, step 10, rate. (Use the 2000 GS basic schedule). 
2000 GS basic rate
2000 GS basic rate
Difference 
$72,586
$55,837
$16,749 
(GS13, step 10)
(GS13, step 1)
($72,586  $55,837)

Step 3: Divide the results of step 1 by the results of step 2. Carry the result to the seventh decimal place and truncate. 
$15,163 $16,749 = 0.9053077

Step 4: Subtract the GS13, step 1, rate from the GS13, step 10, rate. (Use the 2001 IT special salary rate table, 999C). 
2001 IT special rate
2001 IT special rate
Difference 
$78,281
$60,212
$18,069 
(GS13, step 10, Table 999C)
(GS13, step 1, Table 999C)
($78,281  $60,212)

Step 5: Multiply the results in step 3 by the results in step 4.

0.9053077 x $18,069 = $16,358.00483

Step 6: Add the results of step 5 to the GS13, step 1, IT special rate from Table 999C and round to the next whole dollar. 
$16,358.00483 + $60,212 = $76,571 
The employees GM IT special rate in 2001 is $76,571. 
8b. GM employee at grade GS13 on the IT special rate schedule
Locality Rate Determination
Basic Rate for GS33413: $71,000 (December 2000)[between steps 9 and 10] Location: WashingtonBaltimore, DCMDVAWV IT Special Salary Rate: Table 999C

Step 1: Subtract the GS13, step 1, GS basic rate in 2000 from the employees rate of basic pay in 2000. (Use the 2000 GS basic schedule.) 
2000 GM basic rate
2000 GS13 basic rate
Difference 
$71,000
$55,837
$15,163 
($71,000  $55,837)

Step 2: Subtract the GS13, step 1, GS basic rate in 2000 from the GS13, step 10, GS basic rate in 2000. (Use the 2000 GS basic schedule.) 
2000 GS13 basic rate
2000 GS13 basic rate
Difference 
$72,586$55,837
$16,749 
(GS13, step 10)
(GS13, step 1)
($72,586  $55,837)

Step 3: Divide the result of step 1 by the result of step 2. Carry the result to the seventh decimal place and truncate. 
$15,163 / $16,749 = .9053077

Step 4: Subtract the GS13, step 1, rate in 2001 from the GS13, step 10, rate in 2001. (Use the 2001 GS basic schedule.) 
2001 GS13 basic rate
2001 GS13 basic rate
Difference 
$74,553
$57,345
$17,208 
(GS13, step 10)
(GS13, step 1)
($74,553  $57,345)

Step 5: Multiply the results of step 3 by the results of step 4. 
.9053077 x $17,208 = $15,578.5349

Step 6: Add the results of step 5 to the GS13, step 1, GS basic rate in 2001 and round to the next whole dollar. 
$15,578.5349 + $57,345 = $72,924 [Note that $72,924 exceeds the employees former GM basic rate of $71,000 by approximately 2.7%, which was the amount of the GS acrosstheboard increase in January 2001.]

Step 7: Multiply the results of step 6 by the DC locality rate in 2001. 
2001 GM basic rate
2001 GM locality rate 
$72,924
$80,384 
(2001 GM basic rate, determined in step 6)
($72,924 x 1.1023)

The employees locality pay rate in 2001 is $80,384. The employees IT special rate ($76,571) is the underlying rate of basic pay used for some pay administration purposes. (IT special rate table 999C provides a 5 percent special rate supplement at grade 13. Note that the employees IT special rate of $76,571 is approximately 5 percent above the GM basic rate of $72,924.)  
