GovernmentExecutive.com

When President Obama signed the fiscal 2010 National Defense Authorization Act on Wednesday, he made the repeal of the Pentagon's pay-for-performance plan official. As the Defense Department prepares to move the 200,000 employees covered by the National Security Personnel System back to their old pay arrangements, workers have been assured, by law and by the department, that they will not see their salaries reduced. But exactly how the rollback will affect employees who saw their pay rise significantly under NSPS is an open question.

"No employee shall suffer any loss of or decrease in pay" when they move back to their previous setup, the conference report on the Defense authorization bill declared. And in a series of answers to frequently asked questions, the NSPS program office affirmed that "employees will not be reduced in pay upon conversion."

Most NSPS employees ended up receiving annual pay hikes in line with the raises granted their General Schedule counterparts. The challenge is that some employees received dramatic salary boosts under the pay-for-performance system. In fact, some made out so well they are bumping up against the statutory pay cap for General Schedule, Grade 15 employees. Others are receiving salaries higher than the highest step within their General Schedule grade. The schedule is not designed to accommodate these situations, so one of Defense's major tasks in planning for a rollback will be to determine how many employees are at the limits of pay caps and what to do about it.

Matt Biggs, legislative director for the International Federation of Professional and Technical Engineers, said a reasonable first step would be to raise the federal civilian pay cap, or to create exceptions for NSPS employees whose salaries exceed the pay cap.

"There's been talk a long time of lifting the pay cap, and here's an opportunity to do that," Biggs said. "It's not an outrageous thing to do -- it's probably timely."

Including locality payments, the ceiling for General Schedule employees is $153,200 annually, or Level VI of the executive pay schedule. Congress can increase the limit, as it did for the Government Accountability Office in 2008 as part of the agency's pay-for-performance system. The Senior Executives Association has called repeatedly during the past year for an increase in the pay cap for members of the Senior Executive Service, but lawmakers have not acted on this request or to raise the ceiling for rank-and-file employees.

For employees at lower pay grades, there are multiple options. Defense cannot simply move these workers into a higher pay grade that matches their salary under NSPS because doing so would result in numerous noncompetitive promotions. According to Biggs, Defense and the Office of Personnel Management could decide to add steps within pay grades to accommodate former NSPS employees whose salaries didn't fit within the current structure. He said such a move was unlikely, however, and that it was more likely Defense would grant former NSPS employees a special pay rate until General Schedule pay rose to meet their salaries.

William Dougan, national president of the National Federation of Federal Employees, noted that in similar situations, some departments allowed employees to keep their higher pay but gave them lower annual raises or cost-of-living adjustments until their co-workers' salaries caught up. That is not an ideal situation, he said.

"Obviously there's potentially a financial hit," he said. "You could argue they're not getting the same cost-of-living adjustment, but you could argue they're having pay protected at a higher rate than their counterparts. They're coming in at a higher rate, but they're being held back."