Government Pay System for the 21st Century, Part II

The first article on this subject introduced the concept of a new pay system in government. In the second article, the author goes into further detail on what this system might look like.

Editor’s note: The first article on this topic introduced the author’s concept of a new pay system. In part two, the author goes into additional detail about the proposed pay system.

The next generation government pay system should be based on the fundamentals of the GS system with an extra pay for performance component to increase short term motivation. The new pay system should take advantages of the promotion-based incentive benefits of the GS system and maintain the GS pay table that has been a bedrock of the system for decades. The GS pay table has a number of benefits beyond familiarity; the pay table “helps ensure transparency and credibility in the pay system.”2 However, the automatic within grade salary increases for employees that promotes tenure not performance should be abolished. Instead, within grade salary increases should be earned through performance. This is the pay for performance twist on the seniority-based GS system.

The new pay system should use the GS table to group similar employees in a pay group based on the employee’s grade and step. For each grade, steps 1-3, 4-6, and 7-10 should be grouped together. The employee ratings within a specific group will be compared against each other to determine the pay for performance component of the system. Based on the appraisal score and step level group, a percentage of the employees will receive either a promotion to the next grade, a salary increase to the next step group, or a step increase. These high performers would also be eligible for a bonus and guaranteed the cost of living increase. The below average performers would not receive a bonus and the worst performers would not receive the cost of living increase. The new system would retain the long term promotion-based motivation incentives of the GS system and include pay for performance short term motivational benefits to improve employee performance.

Bonus System

For decades researchers have claimed the GS bonus system is broken. The new pay system should resolve this issue by linking pay with performance. The government essentially has four main ways to obtain funds for annual salary increases and bonuses:

  • Year-End Bonuses,
  • Within Grade Step Increases,
  • Quality Step Increases and
  • Cost of Living Increases.

The new pay system should not guarantee automatic step increases or the cost of living increase for all employees. Instead, the new system should deny cost of living increases to the poorest performers and allocate step increases based on employee performance, not tenure. As mentioned above, employees should be grouped with others in the same grade and step group. The highest performers in the top percentage of their group would receive a promotion to the next grade and a subsequent salary increase. The percentage of employees that receive a promotion to the next grade should also be based on their step group. The next percentage of top performers would advance to the next step group and receive a subsequent salary increase. The next percentage of high performers receive a within grade step increase and a smaller salary increase. All previously mentioned high performers are also eligible for a lump sum bonus in lieu of, or in combination with the salary increase. A percentage of above average employees should be eligible to receive a bonus based on their appraisal performance score. The new pay system must assure the bonuses are significant, 3-10% of the employee salary, in order to motivate employees. The new system should acquire the extra bonus funds by denying the worst performers a cost of living increase and time-in-grade step increase. The next poorest performers would retain their cost of living increase but be denied a step increase and bonus. The percentages used for the new pay system should vary based on the step group and must be determined through detailed analysis of the organization’s employee grade and step proportions and future budget projections. A theoretical demonstration of the breakdown is portrayed in the table below.

Percentage of Employees that Receive a Performance Bonus (Hypothetical Scenario)
Grade Step Group Grade Promotion Step Group Advance Step Increase Lump Sum Bonus Cost of Living Increase Nothing
Steps 1-3  Top 1% Top 10% Top 45% Top 45% Top 90% Bottom 10%
Steps 4-6 Top 3% Top 5% Top 35% Top 45% Top 90% Bottom 10%
Steps 7-10 Top 5% n/a Top 25% Top 45% Top 90% Bottom 10%
Average Top 3% Top 5% Top 35% Top 45% Top 90% Bottom 10%


Designing and implementing a new pay system for the government is a complicated and challenging task. Not only is it difficult to design an appraisal system to accurately measure government performance, but the recent failure of DCIPS has left employees with a negative sentiment towards new systems. The proposed pay system may not be popular with the entire workforce and will likely draw the deepest criticism from poor performers. However, the poorest performers are probably the employees that should be released to increase performance and hire new talent. Ultimately, the goal of any new pay system is to attract, retain, and motivate high quality employees. The looming government budget cuts will be a major hurdle for any new pay system, although the cuts also mean it is even more important to retain and motivate the best employees. The government no longer has the funds to operate under an antiquated pay system that lacks motivation for high performers and continues to increase salaries of the worst employees. If the government pay system is not overhauled, organizations will lose their best workers and be forced to eliminate critical missions instead of poor performers. The question becomes whether to jeopardize the security of Americans or the mindset of ineffective government workers. This recommended pay system is one answer to the problem.

Colin Smith received his undergraduate degree in Mechanical Engineering from Vanderbilt University in 2006 and subsequently started his federal career at the National Air and Space Intelligence Center, Wright-Patterson AFB, OH. Colin is currently pursuing his Master’s degree from the University of Dayton in Engineering Management.


  1. Peiperl, Maury. “Getting 360-Degree Feedback Right.” Jan. 2001.
  2. Lee, Christopher and Straus, Hal. “Two-Thirds of Government Workers Get a Bonus.” 17 May 2004.
  3. National Academy of Public Administration. “The Defense Civilian Intelligence Personnel System: An Independent Assessment of Design, Impact, and Implementation.” 2010.