President Proposes 1.5% Pay Raise for Feds in 2005

The Administration is proposing a 1.5% pay raise for federal employees in 2005

The process of determing the federal pay raise for 2005 has started. As we noted yesterday (check out the article link on the left hand side of this page for more), the President has proposed a pay raise of 3.5% for military personnel for 2005.

The Director of the Office of Management and Budget announced yesterday that the proposed raise for federal employees in 2005 is 1.5%.

In addition, money will be available to top performers in government. This money would come from the Human Capital Performance Fund. The Administration has proposed that $300 million be put into this fund to be distributed to the government’s top performers.

It is not surprising to see the continued belief in rewarding pay for performance among the federal workforce. To give readers a better idea of the philosophy behind the proposal, here is the excerpt from the OMB budget briefing held on February 2nd relating to the federal pay raise. (Joshua Bolten is the OMB director. Austin Smythe is the executive associate director at OMB.)

Question: “What are the proposed federal civilian and military pay raises and the philosophy behind them?

DIRECTOR BOLTEN: I hope I get this right, from memory. The question is, what are the proposed civilian and military pay raises. The military pay raise, I recall, is 3.5 percent, and the civilian is set at 1.7 percent, if I recall that right.

MR. SMYTHE: One point. five

DIRECTOR BOLTEN: Is 1.5 percent on the civilian side. But on the civilian side, there is also a fund set aside called the Human Capital Performance Fund. We’re proposing $300 million in that fund, which can be used to support merit increases to give pay for performance in government, which is done all over private sector — we’d would like to see it done in government.

So that money, in addition to the 1.5 percent increase, will be available for civilian employees.

Q Last year, you proposed $500 million in the Human Capital Performance Fund. By the time it passed, it was $500,000. What are you going to do to make sure this gets to —

DIRECTOR BOLTEN: I think we’ve got a — we’ve got a good story to tell on the Human Capital Performance Fund. As I said, that’s the way businesses all across the country, probably your business, as well, that your pay is tied, in some sense, to performance. I see heads shaking here. (Laughter.) I guess maybe journalism doesn’t apply. (Laughter.)

Q Exactly. (Laughter.)

DIRECTOR BOLTEN: A typical feature in most businesses is you pay people more who are performing well. We should not have a civil service system where everybody just gets a big, or even moderately sized, automatic increase. We need to make sure that the people get the increases they need to keep pace with inflation, to keep the family income relatively stable.

But beyond that, what we need to be looking for is to reward the many government employees and, I know from firsthand experience, there are a lot of them who are working real hard, performing terrifically, and deserve that extra — extra reflection in their paycheck for that good performance.”

As readers know from experience in past years, the final decision will not be made for some months until Congress finishes deliberations on the 2005 budget. In theory, that will be done by October. But with the upcoming elections in November, it is likely that the process will take longer. It is also likely that Congress will use the President’s proposal as the starting point in making its decision.

Federal employees should be aware though that the budget reflects a distinct change in philosophy. While we hear from numerous federal employees that they believe their pay is considerably less than that of employees in the private sector, that view is not widely shared by the private sector (or the administration) and is instead, disdained by many. The administration is approaching the federal workforce as the manager of a business would and wants to encourage more productivity and reward those that do the most and best work.

No doubt these views are not shared by many of the career politicians in Congress, the unions representing federal employees and certainly not by many of the employees who participate in the general schedule pay system.

The ride should be interesting–we will keep you up to date as the debate progresses throughout the year.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47