Last January, we published an article about the NSPS pay raise entitled Your 2008 Pay Raise: Would You Prefer 3.5% or 7.6%? The article pointed out that, based on information from the Department of Defense, employees under NSPS received a higher pay raise than most employees under the General Schedule pay system.
The article generated a litany of complaints from people who do not like the NSPS system.
One of the most common complaints was that even though NSPS employees, on average, received a higher pay increase than those under the GS system, the NSPS system is not fair because NSPS employees do not get a within-grade increase as do employees in the GS system.
A similar point (with a much different perspective) has been made before by the Cato Institute in analyzing federal salaries. Chris Edwards wrote: “Between 2000 and 2007, average federal compensation increased at an annual average rate of 6.3 percent, which compares to the private sector increase of 3.5 percent. During the 1990s, average federal worker compensation increased at an average rate of 5.1 percent.”
A Cato report also noted that the the average federal wage increase is often higher than it appears because of within-grade increases that many federal employees receive each year.
With that background, how will NSPS employees fare under the pay for performance system in 2009?
We already know that the average federal pay increase for 2009 will be 3.9% when locality pay is included. In the Washington, DC metropolitan area, the average 2009 pay increase will be 4.78%. Federal retirees receive an annual COLA increase which is automatically calculated each year. For 2009, the COLA increase will be 5.8% for those who qualify for the maximum increase.
The NSPS folks have issued a fact sheet that shows a typical pay increase for employees under NSPS in 2009. It is a complex system, especially for those who are not working within the system every day. Here is how the system will work:
- Performance-based payouts in the form of base salary increases, bonuses, or a combination of both
- An NSPS general salary increase of 1.74%, which is equal to 60% of the General Schedule increase
- An increase to local market supplements (LMS) equal to the increases to General Schedule locality pay rates.
Payouts are effective the first pay period in January. Employees who receive a final rating of record of “3” or higher are eligible for performance-based payouts.
NSPS employees who are rated “2” or higher under the NSPS performance management system get an across-the-board salary adjustment. For 2009, that amount is 1.74% for employees who have a rating of 2 or higher. Another 1.16 percent—is allocated to performance pay pool funds and distributed through the pay pool panel process as performance-based salary increases.
NSPS employees receive local market supplements based on the General Schedule locality pay rates. The increases to these local market supplements will mirror the General Schedule locality increases and be paid to employees with a performance rating of 2 or higher. For 2009, the overall average increase to General Schedule locality rates is 1 percent.
Determining the final salary increase is not possible yet. The actual amount depends on the rating level earned, the amount of shares each employee receives and the dollar value of each share. The Defense Department has not announced how much each share will be for 2009.
However, DoD has issued a performance payout example for an NSPS employee located in Washington, DC. Under this example:
2008 Base Salary: $60,000
Locality Pay: $12,534
Total 2008 Salary: $72,534
And, says DoD, here is what will happen with the employee’s salary in 2009:
NSPS General Salary Increase of 1.74%: $1044
Performance Salary Increase with a 3 rating: $1620
New Base Salary: $62664
Locality Pay for DC: $14475
New Adjusted Salary: $77139
Performance Bonus: $1080
Total Salary Change: $4605.
In this example, the employee receives a total adjusted salary increase of 6.3%, in addition to the cash bonus of $1,080. The employee’s salary increase includes the NSPS General Salary Increase, a performance-based salary increase, and the increase in the Washington DC Local Market Supplement.
All in all, not a bad salary increase, especially during an economic recession with millions of people losing their jobs and a lower annual salary increase for those who are still working in the private sector. Nevertheless, based on the thousands of comments about NSPS sent by readers over the past several years, there is little doubt that many under the NSPS system will be still be unhappy with their increased paychecks in 2009.
Feel free to post your comments on the January 2009 NSPS Payout Fact Sheet in our discussion section for this article.