Incentive Wisdom

Federal employees are looking at continuing threats to their pay and benefits as debt reduction talks continue. Agencies have funds at their disposal for bonuses to recruit, retain and relocate workers, but in a tough fiscal climate they'll have to think twice about how they distribute those dollars, observers say.

Recent data from the Office of Personnel Management shows that the federal government paid out more than $349 million in recruitment, relocation and retention incentives in 2009, a 22 percent increase over the previous year. That jump isn't likely to continue, however. While the two-year federal pay freeze does not apply directly to incentives, OPM Director John Berry in June issued a memo to agency heads asking them to hold total spending on so-called 3Rs payments to 2010 levels through 2012.

Tim McManus, vice president for outreach at the nonprofit Partnership for Public Service, said that as private sector hiring begins to pick up, government could struggle to attract and retain talent while capping the dollars available for incentives. As the economy rebounds, agencies will have to compete with private and nonprofit organizations while maintaining the same level of spending they had available in previous years, he said.

Observers caution that incentives shouldn't be used without thought, however. According to McManus, 3Rs payments must be part of an overall workforce plan -- available to recruit and retain employees to hard-to-fill jobs, for example. If agencies already account for losing a certain number of workers every year, it may not be necessary to offer a retention incentive, he said.

But cash isn't the only thing that attracts and keeps an employee in his or her job, said Paul Rowson, managing director at human resources association WorldatWork, noting that throwing money at someone may delay but often does not prevent a departure. Other rewards, such as workplace flexibility, autonomy and respect from superiors and having adequate resources, are strong motivators that must balance the wise use of monetary incentives, he said.

"Cash that is not tied to performance and rewards is not a particular incentive," Rowson said. "Cash is well down the list in employee value. The only time it works is when you're bankrupt in other rewards, which isn't a good place to be. It should be part of the overall worth."

Financial rewards can be important in recruitment and relocation, however. Cash is a motivator for a potential hire and also can be used as a one-time incentive to help established employees overcome the cost of moving, Rowson said.

According to Rowson, the most important thing for government is to be fair and equitable with its employees. Talent is a great asset in government, and agencies make a significant investment to bring workers in and keep them engaged and motivated during cash-starved times, he said.

"It's how companies behave in turbulent times that defines them," Rowson said. "It's how they treat their people that is never forgotten, especially by the top performers."