Rethinking Federal Pay Should Be a Promise, Not a Threat

Next year will mark 25 years since the Federal Employee Pay Comparability Act was enacted. The law provided for the alignment of General Schedule salaries with nonfederal pay levels—less 5 percent to reflect the value of federal benefits. The law provided for increases starting in 1994 to close the pay gap over five years.

But that never happened. Each president has opted to submit an “alternative” pay plan with lower increases. The increases recommended annually by the Federal Salary Council have never been accepted.

Clearly FEPCA failed. There are provisions of the law that are never criticized (e.g., the designation of senior level jobs) but the methodology now used to estimate the gap has lost credibility. It’s probably not insane, but repeating the analysis year after year is unlikely to produce different results. There are no circumstances today that would gain the support in Congress to close the gap.

A new strategy to secure pay increases, possibly as a response to the freeze, is to request broadened geographic coverage of existing locality pay areas and/or the establishment of new locality areas. Since 2012 employees in 48 locations have contacted the Office of Personnel Management asking to be covered in a locality area. The Federal Salary Council has recommended adding 12 new areas.

The council report also unintentionally highlights a fundamental problem: The many elements of the methodology to determine the gap(s) change to some degree every year. That makes it impossible to compare the results from year to year. No other employer would even consider relying on a similar methodology. The annual reports from the council and the Pay Agent now serve only to trigger a new round of fed bashing.

It’s time to rethink the GS system. It’s an impediment to effective workforce management and good government. The review does not have to be a threat. A new pay system should provide better career opportunities and strengthen employee engagement

Sen. Ron Johnson, the chair apparent of the Senate Homeland Security and Governmental Affairs Committee, stated recently his support for aligning federal pay with private sector levels. He announced plans to hold hearings. He will learn the facts related to market pay levels have not been compiled for two decades.

It would be far more productive to initiate a broader review similar to that which led to FEPCA. It is certainly possible to conduct an objective, data-based assessment. OPM Director Connie Newman accomplished that in 1990. She assembled a group of roughly 15 individuals to discuss possible changes to the GS system. The group met several times and included representatives from the White House, the Office of Management and Budget, the Bureau of Labor Statistics, agency human resources executives, union leaders, and a couple of corporate compensation executives. Today representatives of think tanks should be included.

A subgroup met in closed-door sessions at OPM. These sessions focused on the nuts and bolts of needed changes along with the political considerations to secure congressional support.

In the current climate its doubtful OPM would be tapped to lead the review. One of the few neutral organizations is the National Academy of Public Administration.

To evaluate the GS system and plan a new system, the following should be considered:

• There is a need for a new comparative analysis of federal and non-federal salary levels. The 1990 analysis was based on a combined database of BLS, Wyatt and Mercer benchmark surveys. The analyses confirmed that federal salaries were then below market. In the intervening years no comparable analysis has been completed. Hundreds of surveys are available to support a new market analysis.
• A primary purpose of pay systems is to support staffing plans. That includes attracting qualified applicants, facilitating career progression and limiting the loss of key contributors. To assess the impact of pay levels, it would be useful to analyze recruiting experience and turnover by agency, job series and grade level.
• The experience with new pay models has been mixed. The failure of the Defense Department’s National Security Personnel System received all the attention, but new pay systems at the Government Accountability Office and the Securities Exchange Commission were also terminated. It will be important to understand the missteps. There are also success stories, of course. Successful demo pay systems go back 30 years. Policymakers need to learn what works and what doesn’t.
• The 1990 review included a survey of salary management practices in 80 large, multi-location companies. Repeating the survey would be useful. Hospitals along with state governments could be included in a new survey. Salary management thinking has changed significantly through the years.
• It would also be useful to understand how other countries manage the salaries of managers. Both the World Bank and the OECD have published reports summarizing government pay programs.

Experience introducing new pay systems in higher education, health care and social service organizations confirms the importance of involving employees and stakeholder groups in the planning and implementation. A pay system cannot be planned in the back room and gain acceptance. NSPS confirmed that. Connie Newman understood that.

On some basis a review will be initiated in 2015. An unknown is what issues will be addressed.

The review will require most of the year. It should be completely transparent. If there is agreement on the facts and on needed changes, the work to plan the details and prepare managers and employees will add many months. It promises to be a complex organizational change. There are no winners in the current stalemate.

Howard Risher managed compensation consulting practices for two national firms and has written four books, including Planning Wage and Salary Programs. He has an MBA and Ph.D. from the Wharton School.

(Image via Cheryl Ann Quigley/Shutterstock.com)