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How Well are Government Employees Paid?

by Ralph Smith |

Dr. Howard Risher is the editor of Compensation and Benefits and a consultant on pay and performance with 40 years of experience. In his article How Well are Government Employees Paid? he addresses the topic of determining pay in a system that does not rely on market forces in the same way that the private sector determines pay.

With this expertise in pay and benefits, he discusses federal (and government pay systems generally) with a critique and a broad overview that will interest FedSmith readers. As the pay and benefits of federal employees are the subject of increasing political debate and national elections coming in November, the article is timely. (See An Election in Wisconsin and the “Perfect Storm” for Federal Employees Still Gaining Strength)

Here is a quick summary.

Federal Pay Agent Has “Lost Credibility”

The public will generally accept paying government employees the same as private sector. But, what triggers a political response, are claims that government workers make more money.

Many FedSmith readers cite the calculations of the Federal Salary Council to substantiate their belief they should be paid much more than they currently receive—as much as 25% – 30% more than federal employees are currently paid.

Dr. Risher notes that the recommendations by the federal pay agent to the president have “lost credibility.” The annual recommendations for federal GS pay are signed by the director of the Office of Personnel Management, the director of the Office of Management and Budget and the Secretary of Labor. For reasons he explains in his article, he concludes “It is impossible to conceive of a change in circumstances that will restore credibility to the Pay Agent recommendations.” Moreover, the latest report to the president noted the pay agent has “serious concerns” about the process used to adjust salary ranges and the method used for estimating pay gaps.

Change Coming to Federal Pay System?

The current classification system has been in place since 1949. The problem with this system is that it becomes isolated from market trends over time and any change to the internal system is seen as unfair by employees. The goal of such a system is to maintain “internal salary relationships” in an organization rather than relating government pay to any market system.

While the Obama administration has paid lip service to changing the pay system, there is not any visible effort behind changing the existing system. This is despite the fact that the locality pay system used by the federal government is “out of control” according to the author and that “No business would even consider the practice.”

The problem stems from the theory that all jobs, even in a complex organization like the federal government, can be paid under a single pay schedule. At the same time, labor markets demand the “flexibility to stay competitive.”

Pay for Performance

Pay based on a person’s performance is widely accepted and “has been a global trend for public employers now for two decades.” With financial and political pressure to change the current system away from a system based largely on seniority rather than performance, the pressure will build to institute a performance based system.

“Companies stress emphasizing and rewarding the best performers.” In the absence of pay for performance, performance ratings have few consequences and inflated ratings become commonplace.

Instituting such a system in the federal government will be difficult. Dr. Risher emphasizes that “pay for performance needs to be managed as a major organizational change initiative. Top management needs to champion the change and to reinforce the importance of the policy change to the organization.” And, he concludes, “Employees need to know hat they can expect and kept informed of plans.”

NSPS Experience Needs to Be Avoided

Some FedSmith readers cite the National Security Personnel System (NSPS) as an example of why pay for performance will not work in the federal government. But, he notes, the NSPS “confirmed how not to approach the problem.” Also, mistakes in the Securities and Exchange Commission (SEC) and the Government Accountability Office (GAO) need to be avoided in any new system.

Instead, Dr. Risher cites the system used by the National Geospatial-Intelligence Agency (NGA) as a system that has been successful and one that used a strategy that “should be considered a best practice” it was planned with extensive and ongoing input by managers and employees  and there is also a commitment to assess the program each year and address any problems.

© 2014 FedSmith Inc. All rights reserved. This copyrighted article may not be reproduced without express written consent of FedSmith Inc.

About the Author

Photo of Ralph Smith

Ralph Smith

Ralph Smith is one of the founders of FedSmith.com. He writes in a blunt, entertaining style with a viewpoint that reflects an in-depth knowledge of federal HR issues.

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April 16, 2014

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