Your 2008 Pay Raise: Would You Prefer 3.5% or 7.6%?

Most American companies have some type of pay for performance system. But pay for performance is unique in the federal government and has generated heated debate and intense opposition. With the average employee under the new system getting a raise that is twice as large as the rest of the federal workforce, it may not seem as threatening.

To most Americans, the idea of everyone in their company getting the same pay raise percentage every year regardless of what their supervisor thought of their performance would sound like a program designed for employees working in a socialist state. Trying to change a system based on performance to one where everyone gets the same pay increase as long as they are showing up for work would generate controversy and rancor among the workforce and the best employees would probably check out the job market at competing companies on the theory that the best performers should get more money.

But the federal government doesn’t work that way.

After the President and Congress go through their yearly machinations and come up with a final figure, and after OPM then takes those figures and divides the money based on locality pay differentials, everyone in an organization gets the same pay percentage pay increase every year. And, from comments on this site whenever the topic comes up, most people want to keep it that way. In fact, proposals to change the system usually generate a torrent of comments about pay for performance proposals.

Comments and theories range from those that predict the system will lead to favoritism among the “good old boys” who play poker, go bowling or hunting or have a good relationship with the supervisor; less money for everyone as the system is designed primarily to keep down expenses; or a conspiracy by the current Republican administration to denigrate the performance of federal employees. For a small sample of the spirited debate that can emerge with this topic, check out the comments on this one article (“Are You One of the “Good Old Boys?”)

The Department of Defense has set up a system for some of its employees based on performance. Here is how the pay system should work according to officials at DoD. Check out the comments on the article and you will see similar comments to the ones from the article cited in the previous paragraph.

DoD has now released figures on the results of the new pay system and issued a press release stating that the 2008 rating and payout results are very similar to 2007. Mary Lacey, Program Executive Officer for NSPS was quoted as saying “We are seeing close to the same rating distribution in 2008 that we did in 2007. Last year, approximately 97 percent of the workforce performed at the valued performer or higher levels.”

Fifty-seven percent of employees were rated as valued performers (Level 3)

Approximately 36 percent of employees received an exceeded expectations rating (Level 4)

Approximately five percent of employees delivered role model performance (Level 5)

Less than two percent of employees received fair (Level 2) or unacceptable (Level 1) ratings

This year, the average federal employee under the general schedule received a pay raise of 3.5%. This is based on an overall increase of 2.5% with an addition of locality pay for many federal employees.

Those in the Washington, DC area got a 4.49% raise–the highest increase in the country. The “rest of the U.S.” received a 2.99% pay raise.

For those 110,000 people under the NSPS system the average raise was 7.6%.

Here is how the pay for 2008 breaks out according to DoD:


Type of AdjustmentPerformance IncreasePay Band Adjustment (base salaryLocal Market Supplement (equivalent to locality pay)Average5.9%1.7%7.6%

Salary Bonus Total
3.4% 1.7%

Even for those of us who struggled with math in school, it is apparent that the average employee under the NSPS system got a raise more than twice as large as the rest of the federal workforce.

And there is even better news for those that got the highest marks under the performance based pay system. According to Steve Barr in a column for the Washington Post, “…5 percent of the 110,000 employees received 10 percent raises for superior job performance. At the other end of the scale, 0.2 percent got no raise because their work was deemed unacceptable.”

No doubt, those who got the 10% raise probably feel better about their jobs and their employer knowing that they got about 6.5% more than the average federal employee. Most of us would feel our contribution was recognized and probably feel good about a system that gave us more money based on a higher performance rating. The 0.2 percent probably feel that the system is unfair because they didn’t get any money. Presumably, some of these folks may quit or look for a job in another agency where they will be guaranteed to get the same pay raise as everyone else. And, for the manager in charge of the organization that gave out a lower than average performance rating, there is a good chance that an employee who leaves after getting a low rating is a beneficial event for the organization.

Change is always difficult in large organizations. It is even harder in a situation where employees are seeing numerous articles and receiving correspondence from others, including their union, that the new system will be harmful in some way.

For those of us who are outside the system, it is impossible to judge how fairly pay for performance is working. But, if the statistics are any guide, it sounds like it can be a good system for the best employees and for the agency–just as millions of American companies have discovered in trying to keep and motivate the ones that help the most in making the company a success.

And, for those who do not like the system but may have gotten twice as much money as they would have gotten working in another agency, chances are they are not as opposed to pay for performance as they were a few weeks ago.

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