Federal Employee Performance Ratings Get Major Overhaul Under New OPM Rule

The Office of Personnel Management (OPM) finalized a rule overhauling the performance ratings system for federal employees in the largest overhaul in decades. Such ratings affect everything from promotions and awards to discipline and retention. 

Among the biggest changes is the end of a longstanding ban on forced distribution of performance ratings. The rule allows agencies to limit the percentage of employees who receive the highest performance ratings, ending a longstanding prohibition on forced distribution.

The rule states that the forced distribution will apply only to the top two ratings levels but does not specify caps. “OPM retains discretion to determine the scope and structure of any standardized distribution,” the rule says. 

The rule also eliminates “level 2” of the five-level employee ratings scale, ends the required higher-level review of employees who receive a level one rating, and removes the ability for employees to contest their ratings through grievance and arbitration proceedings.

In addition, supervisors will receive reviews that will be tied in part to “driving a culture of accountability” and will have to complete additional training on the new system. OPM is also required to review the system every two years. 

Agencies across government must follow OPM’s changes by January 1, 2027.

Targeting Ratings Inflation

OPM says the overhaul is needed to cut down on ratings inflation and more accurately measure the performance of employees. 

“The evidence clearly shows that the federal government’s approach to performance management has long struggled to accurately measure employee performance,” stated OPM. 

For example, the agency noted that in 2024, 43 percent of employees below the senior level were rated a 5 (outstanding).

“The current system suffers from leniency bias whereby supervisors arbitrarily issue inflated performance ratings to avoid confrontation, lack of support from management, or other factors that undermine the performance management evaluation process,” said OPM.

In response, critics noted the change could hurt morale, workplace culture, and stifle innovation.

The American Federation of Government Employees (AFGE), for example, argued that “The standardized distribution of ratings will effectively result in employees being rated not based on their ability, knowledge and skill, but instead, against one another. This type of rating system has all the earmarks of a popularity contest, not a meritocratic evaluation system.”