Those ‘Automatic’ Within-Grade Increases and a Performance Based Pay System

OPM has issued a memo telling agencies that within-grade increases are not supposed to be given out automatically. Will the memo change the existing system? Not likely. Here’s why.

The director of the Office of Personnel Management, John Berry, has issued a memo to agency heads that reads as follows:

“[L]aw and regulations state that a GS employee’s performance must be at an acceptable level of competence, as determined by the head of an agency (or designee), before the agency may grant a within-grade increase to that employee (5 U.S.C. 5335 and 5 CFR part 531, subpart D). An acceptable level of competence is signified by achieving a rating of record of Fully Successful (or equivalent) or higher (5 CFR 531.404(a) and 531.409). Employees with ratings of record below the Fully Successful level (or equivalent) are not eligible for within-grade increases and must not receive such increases.”

No doubt, OPM is aware of a recent report issued by the Federal Times that a miniscule number of federal employees are actually denied a within-grade increase (WIG).

In fact, only one out of approximately every 1700 federal employees was denied a within-grade increase in 2009 or about .06%. And, despite the low percentage, that is actually a little higher than in previous years.

In effect, a within-grade increase is automatic and based almost entirely on seniority. Performance has little or nothing to do with an employee receiving this pay raise.

So why is OPM bothering to issue this memo now? Politics.

There is pressure from Congress to institute a performance based pay system. Some FedSmith readers have commented that performance based system isn’t necessary because we already have one. They argue a federal employee’s within-grade increase is based on performance and that is sufficient.

In fact, a performance system exists only on paper to make an automatic pay increase that is awarded based on seniority look and sound better when testifying before Congress and when trying to persuade the American public that does not understand the federal pay system that no changes are necessary.

Why Would a Supervisor Withhold a Within-Grade Increase?

The reality is this: Any supervisor who wants to withhold a within-grade increase without also taking action to fire the employee is naive, or following an order from somebody higher in the chain of command, or is new to the federal system and trying to make a favorable impression without realizing what he or she is about to trigger by withholding an employee’s WIG.

A GS-12, step five federal employee who works in the Washington, DC metropolitan area makes $84,855 per year. That is a little less than the $93,000 or so the average federal employee now makes in Washington, DC. (And, yes, the average federal employee in Washington makes considerably more than the average federal employee for a variety of reasons, including higher grades given to people working in headquarters offices. Those withholding a within-grade increase in most areas of the country will be holding back less than this example.) If this employee is promoted to a GS-12, step six, his salary will increase to $87,350—an increase of about $2,500 per year.

When a within-grade increase is withheld, the employee can appeal. Most will do so. The cost to the agency of preparing, defending, and arguing the action to withhold a WIG can easily run into tens or even hundreds of thousands of dollars.

Private sector law firms have developed a practice of helping employees (and charging an appropriate fee) when an agency decides to with hold a within-grade. Here is a quote from one firm:

The burden is on the Agency to show that the employee is not performing at an acceptable level of competence. Ultimately, the Agency will have to show the existence of performance standards, and how the employee failed to meet those standards in order to prevail. The burden is never on the employee to prove that their performance was acceptable.

Unions argue that the problem is not the system and that the fault is incompetent or poorly trained supervisors who do not use the existing system. There may be something to that but, from my dealings with hundreds of federal supervisors, most knew how the system works and would prefer to have a tooth pulled than engage in the all consuming legal battleground to withhold a small amount of money from an employee for one year and then face the same issue again the next year. The existing system essentially ensures WIG’s will be awarded and the unions, and probably many employees, like it that way.

Why is OPM Issuing This Memo Now?

OPM is certainly cognizant of how the system works. The agency also knows that issuing a memo is essentially a useless action that will not change the system. If OPM truly wanted a system that awarded a within-grade based on performance, they would work with Congress to create a system that does not involve months or years of appeals at a high cost to the agency in terms of salary, time and loss of productivity and efficiency.

Instead, OPM is issuing a memo. It can bring it out at a convenient time, a union or other employee group can cite, and anyone wanting to defend the current system can use it to say: “We already have a performance based system in the federal government. No changes are necessary. Here is the OPM memo to prove it.”

Everyone can lie with a straight face. OPM is providing a cover memo to preserve the existing system.

How come? There are at least two good reasons.

Congress, at least the House of Representatives, has already discussed a ban on within-grade increases. That is unpopular with employees and with federal employee unions. Along comes the OPM memo to provide a cover argument that keeping the existing system, and not banning within-grade increases leads to a more effective government by rewarding the best performing employees.

Also, an election is coming up. The administration wants the active support of unions. Unions don’t want to change the system. Many employees don’t want to change the system. There are many entrenched interests who prefer the existing system that rewards seniority and ignores performance.

OPM is a political agency. It will do what it can to defend the current system if that is what the administration wants or needs to help win an election. Productivity or efficiency in agencies, saving money or creating a system, even a perfunctory one that is based on performance, are unimportant compared to garnering political support and winning elections.

The final result: Don’t look for any significant changes to the current system unless Congress makes it happen.

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