Defense Secretary Pete Hegseth has directed all department heads to recognize “outstanding” Defense Department civilian employees with cash bonuses.

A Dec. 15 memo authorizes Pentagon leaders to award the top 15% of civilian employees bonuses worth 15% to 25% of their basic pay, capped at $25,000.

Hegseth said if department heads want to recognize more than 15% of their civilian workforce with cash awards, they can do so within their internal budget.

“Since the dawn of the Republic, civilian employees have played an essential, foundational role in driving the success of America’s military and ensuring it prevails on the battlefield. Over the past 10 months, Defense Department civilians upheld that proud tradition through their steadfast support of the worldwide mission of U.S. armed forces and their dedication to executing the transformational changes necessary to revive the warrior ethos, rebuild our military, and reestablish deterrence,” Hegseth said in the memo.

“These achievements have not been easy. The uncertainty and adversity inherent in all periods of change can test even the most elite workforce. Further, the longest Government shutdown in American history imposed severe strain on our civilian workforce. The resilience our civilian teammates have demonstrated throughout this challenging time is an inspiration and deserves to be recognized,” he added.

Department heads are required to coordinate with their financial management and comptroller organizations to confirm funding availability for these awards. 

Hegseth said the effort to reward the department’s “very best” civilians is separate from any previously issued awards and directed department heads to issue the bonuses by Jan. 30.

“I am enormously grateful for the incredible contributions of our entire civilian workforce, and I am proud to work with everyone in the Department, military and civilian, in defending our nation,” Hegseth said.

The memo builds on earlier guidance from Undersecretary of Defense for Personnel and Readiness Anthony Tata that seeks to expand the use of civilian workforce incentives and awards to recruit and retain top talent. The document encourages broader use of existing incentives, including cash awards up to 20% of basic pay and time off awards up to 80 hours per year, to “recognize exceptional civilian contributions,” particularly in high-impact or hard-to-fill roles. It also eases approval requirements for large cash awards.

The memo to recognize top talent comes amid Hegseth’s broader push to shrink and reshape the Pentagon’s civilian workforce — an effort he once described as “clearing out the debris.”

The department has lost more than 60,000 employees since the beginning of the Trump administration through voluntary separation programs, reaching the 5% to 8% reduction goal Hegseth set earlier this year. In addition, the Defense Department, along with other federal agencies, remains under a near-total civilian hiring freeze that has been extended indefinitely to further reduce the size of the federal workforce. 

President Donald Trump and Hegseth also announced “warrior dividend” bonuses for service members last week, which Trump suggested would be funded by tariff revenue. The payment is actually a one-time basic allowance for housing stipend and will be paid using funds Congress appropriated to the DoD in the One Big Beautiful Bill Act to supplement the basic allowance for housing.

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