OPM chief blasts General Schedule pay system

The government's system of classifying and paying workers is outdated and needs reform, Office of Personnel Management Director Kay Coles James said Tuesday. Speaking to a gathering of federal human resources officials in Alexandria, Va., James said the General Schedule classification system needs to change. "The idea that the civil service is merely an undifferentiated workforce of low-graded clerks intent on a 30-year career has got to go, and so do the systems that were designed to support such notions," James said at OPM's Strategic Compensation conference. "The work has changed and the worker has changed, and we can't continue paying people in essentially the same way we did when the system was created in the 1940s." James' remarks come as the Bush administration prepares to introduce legislation dubbed the Freedom to Manage initiative, under which a variety of rules affecting federal managers would either be lifted or changed.

OPM officials say they won't discuss specific provisions of the legislation until after the Labor Day weekend. But Office of Management and Budget Director Sean O'Keefe said last week that the legislation will propose an increase in the use of pay banding, a compensation system that could replace the General Schedule for at least some federal workers. Agencies would not be forced to adopt pay banding, though many human resources officials across government say they are interested in it. Under pay banding, the 15-grade General Schedule with 10 steps per grade is turned into a four- or five-level salary system, typically with no pre-set steps per level. Managers can then set salary rates within the pay bands using more discretion than the General Schedule allows. Pay banding has been tried in various Defense and Commerce Department agencies, as well as at other federal offices under small-scale demonstration projects. Paul Light, a scholar at the Brookings Institution, said the government has little proof that demonstration projects actually work. "We've been doing demonstration projects around government for 20 years. I wish I could tell you a lot about which ones work and which ones don't, but we don't know," said Light. "Unfortunately for this OMB, past OMBs and OPMs have not been really interested in studying the effects of these changes." But James said that the General Schedule system doesn't fit the government's needs. The General Schedule system "does a reasonably good job of maintaining internal equity--it's what the whole classification system is all about," James said Tuesday. "While basic internal consistency is important, internal equity is only one part of the equation." James said that the government's compensation system must also encourage "individual equity," in which employees are rewarded or punished for their performance, and "external equity," in which government pay is competitive with pay in the overall labor market. The federal locality pay system addresses one aspect of external equity, but fails to address pay differences among occupations and grade levels, according to OPM officials. Jason Peckenpaugh contributed to this story.