Pentagon rolls out performance-based pay

Ninety-seven percent of employees working under the first round of conversion to the Pentagon's new personnel system will receive performance-based payouts this year, according to an online notice posted Wednesday.

The 11,000 employees working under the National Security Personnel System's Spiral 1.1 conversion were given a performance rating on a scale from one to five. The bulk of those employees -- 64 percent -- received a rating of three, defining them as "valued performers," according to the notice.

Employees were awarded "shares" based on the average of their performance ratings in several categories. An average rating of five earned five to six shares, a four rating earned three to four shares, a three rating earned one to two shares and a two or one rating did not earn any.

To calculate payouts under the new system, the department multiplies employees' base salaries by their ratings and adds the results to arrive at a "Total Salary Share Product." The pay pool available is divided by the Total Salary Share Product to calculate the value of a single share. Shares are thus worth different amounts depending on how the rest of the employees in a pay pool performed.

The largest portion of employees in the first round -- 41.7 percent -- received two shares, while only 3.7 percent received either five or six shares.

Additionally, employees with performance ratings of two and higher received the equivalent of the January 2007 General Schedule pay adjustment of 2.2 percent. But employees receiving an "unacceptable" rating of one did not receive the annual adjustment.

One Spiral 1.1 employee, who spoke under condition of anonymity, said there appeared to be pressure from upper management to ensure that the vast majority of employees received a rating of three, adding that a rating of five was rare. "In our office, we have the [organization's] engineer of the year, yet we didn't have any fives," the employee said.

The employee also said there was an approximate 50/50 split on the payouts, awarding half of the payout as a bonus and the other half as a salary increase. "The problem is everyone wants a raise instead of a bonus because a raise affects your retirement," the employee said. "These payouts will neither motivate or de-motivate my future performance."

Still, NSPS Program Executive Officer Mary Lacey found that senior leaders of Spiral 1.1 organizations have provided positive feedback, the notice said.

Thus far, they have said that employees and supervisors have benefited from NSPS training and aligned job objectives with organizational missions, the notice said, adding that supervisors have made meaningful and fair distinctions regarding employees' job performance.

"As the implementation of NSPS proceeds, the [program executive officer] will work closely with components to ensure that the system meets organizational needs and improvements are incorporated," the notice stated.

According to NSPS spokeswoman Joyce Frank, the appraisal cycle for employees working under Spiral 1.2 and 1.3 will end Sept. 30. Those employees can expect to receive their ratings and payouts resulting from those appraisals in early January 2008, she said.

Frank added that the department is also in the process of identifying the organizations that will be a part of Spiral 2, which is set to begin in October.