Welcome to the Real World! What Will Your 2008 Paycheck Look Like? DoD Makes Last-Minute Changes

There are more changes to the NSPS system that will please some under the system. It isn’t simple but it is based on pay for performance–a horrifying concept according to many comments from readers who like the system of everyone getting the same pay raise every year.

The Department of Defense has posted new information about raises for those employees who are under the National Security Personnel System (NSPS).

Anyone reading comments on this site from readers about NSPS will quickly conclude that many people under the system are afraid of it and, for a variety of reasons, are unhappy with the new system. Not surprisingly, changes to a pay system are likely to create resistance and this change is no exception.

According to the new fact sheet, the NSPS will have a few changes from what was originally envisioned. What it amounts to is this: Those under NSPS will get 60 percent of the base salary increase that most other federal employees will get starting this month. The difference is that the 40 percent of their raise will be based on the employee’s performance evaluation. In other words, those that do a better job get more money. Those that are not rated as highly get less money.

This pay for performance concept, common to most private companies, is what has so many federal employees under the new system hyperventilating. Chances are new employees coming into the system will probably be comfortable with the prospect of getting paid more when they get a higher rating because it is a generally accepted concept in private industry. But, for those who have been in the federal system for decades, the annual federal pay raise is often considered an entitlement that generally reflects cost of living increases with little relationship to how well (or poorly) the manager rates a person’s performance for the year. The idea of having to get a higher rating, and to make sure the supervisor doing the rating is satisfied with an employee’s performance to get more pay, creates visions of a lower paycheck based on a supervisor’s judgment.

Here is how the Department of Defense says the system will work for 2008.

  1. Employees receive pay increases from pay band adjustments, local market supplements and performance payouts
  2. Organizations set aside funding for performance payouts.
  3. Performance payouts are based on the final performance ratings for an employee. The payout can be paid out in the form of a base salary increase, bonus or a combination.

For comparison purposes, the average government-wide pay increase for 2008 is 3.5%. 2.5% of this is an increase in the employee’s base salary and 1% is for locality pay. The reality is that the federal pay system is a myriad of pay tables that have different amount in different regions. Employees who are not under NSPS and live in the Washington, DC metropolitan area will get a raise of 4.49%. Those in Seattle will get 3.51% and those in Milwaukee will get 3.56%. The lowest will go to those in Cincinnati with 2.84% so the raises are obviously varying widely. For just about everyone, the real question is: "How much will I get at my grade, pay and city?"

For those under the NSPS the system will work this way.

  • Sixty percent of the base salary increase (1.5%) will be applied to pay band adjustments for employees who received a final rating of record of 2 or higher.
  • Forty percent of the base salary increase (1.0%) will be allocated to Element 2 of pay pools and paid out as performance-based base salary increases to employees who have received a final rating of record of 3 or higher.
  • Local market supplement adjustments are given in the same manner and extent as GS locality pay for employees who received a final rating of 2 or higher.

Employees who receive a final rating of record of 3 or higher are eligible for performance-based payouts.

The pay pool fund has three elements:

  • Element 1 – Base pay funds historically spent on within-grade increases, quality-step increases, and promotions between General Schedule grades that no longer exist in NSPS. Element 1 funds are typically paid out as base salary increases but may also be paid out as bonuses. For 2008 payouts, this is 2.26% but may vary by pay pool.
  • Element 2 – Money available from the government pay increase. This money is used for base salary increases. For 2008 payouts, Element 2 is 1.0 percent (40% of the base salary increase of the government-wide pay increase).
  • Element 3 – Money historically spent on performance-based bonuses. For 2008, this amount varies by organization.

So, putting it all together, this is what employees in NSPS can expect:


Final Rating Employees are Eligible to Receive
5. Role Model
  • Pay Band Adjustments
  • Local Market Supplement
  • Performance-Based Pay
4. Exceeds Expectations
  • Pay Band Adjustments
  • Local Market Supplement Increases
  • Performance-Based Pay
3. Valued Performer
  • Pay Band Adjustments
  • Local Market Supplement Increases
  • Performance-Based Pay
2. Fair
  • Pay Band Adjustments
  • Local Market Supplement Increases
1. Unacceptable
  • No Increases


Happy New Year! Feel free to express your opinion on the new system in our comments section. And, as many of today’s college students say, including those who may be coming to work to replace the aging boomers, "Welcome to the real world."

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