The 2019 budget plan from the Trump administration will be delivered on Monday according to numerous reports. Federal employees should be interested as there are reportedly proposed changes to the current pay and benefits program.
Impact of Heritage Foundation Report
The Heritage Foundation writes that its proposed changes to the federal pay and benefits program would reduce accrued federal employee compensation costs by about 10 percent between 2017–2026. The savings would total over $330 billion by 2026.
A Heritage Foundation study found that federal employees are paid 22 percent higher wages, on average, than similar private-sector employees. A portion of their report focusing on federal pay and benefits was previously published by FedSmith.
Heritage notes that higher federal employee wages are possible “because the federal government operates outside of market forces that keep wages in line with productivity; it does not have to compete for taxpayer dollars and has significant advantages in its ability to finance deficits.”
It is not a surprise that some of the Heritage Foundation proposals are now working their way into ideas for changing the federal pay and benefits structure.
Possible Changes in Federal Budget
We will not have specific details until the budget is released and available for review. From the details that are now emerging, we have an idea of some of the changes that will be pursued. Many of these changes will require legislation to implement the changes. Some others could be done unilaterally by the administration.
Changing Within-Grade Increases
One change is to change the structure for awarding within-grade increases. The changes to be proposed would slow tenure-based increases (WIGs) to a merit-based system instead of what has become an automatic pay increase based on how long an employee has worked for the government.
Currently, the step increases can provide an employee of about 3 percent to 5 percent pay raises. The vast majority of federal employees receive these increases based primarily on the length of time an employee has been working in the same GS grade.
In theory, the increases are granted if an employee is performing at an acceptable level. One report notes that 99.7 percent of federal employees receive these increases when their time in a grade has been met with little or no regard to their actual performance.
The reason for the large percentage of employees receiving the increases is that the current system takes about the same time and effort to withhold a step increase as to take a more severe performance or disciplinary action against an employee.
Most supervisors do not see the benefit in withholding a step increase. If they are going to the trouble of taking action against an employee, there is more benefit to removing an employee or taking a serious adverse or disciplinary action rather than withholding a step increase.
The overall goal of changing the current federal human resources system is to change the older, less flexible civil service structure. The administration hopes to introduce automation, reward “the best” employees with larger bonuses, make it easier to hire and fire, and provide “flexibility” by moving employees to geographic locations they are needed the most.
These philosophical changes reflect the Heritage Foundation report on the federal civil service outlined in Proposed Changes to Federal HR: From Worst Case to Possible.
Other Significant Proposals Likely to Emerge
Making it Easier to Fire Federal Employees
Several proposals to rid the workforce of less productive employees are likely to emerge, if not in the new budget proposal, then in subsequently proposed changes backed by the administration in Congress. Here are several possibilities.
- Extending the probationary period from one year to three years.
- Allowing employees to appeal their dismissal through one forum instead of up to three different forums.
- Lowering the standard on the burden of proof necessary to fire a federal employee. This could be done by changing the requirement of proving that dismissing an employee will improve an agency’s performance to requiring it is reasonable to assume firing the employee will improve an agency’s performance.
Other Proposals That May Emerge
Based on the Heritage report, there are several other proposals that may be floated for changing the civil service system:
- Combine vacation and sick leave into one plan. This would result in 16 days for workers with fewer than three years of service and up to 27 days for federal employees who have worked longer time periods.
- Alternatively, maintain separate vacation and sick leave accounts but restrict the total leave available. Reduce current vacation allowance from 13 days, 20 days, or 26 days (depending on years of service) to 10 days, 15 days, and 20 days.
- Reduce sick leave days from 13 days to 10 with the ability to roll sick leave over from year to year.
- Remove the government subsidy for health insurance benefits after retirement for new federal employees.
- Transition to a new retirement system. No changes to retirement for federal employees with 25 years or more of federal service.
- Vested employees (with between 5 and 25 years of service) would have several options:
- Remain in the FERS system and continue to receive both FERS and TSP benefits but pay a higher share of FERS costs.
- Maintain a frozen FERS benefit with no further FERS contributions but receive an additional 3 percentage points of matching TSP contributions, for a total government-provided contribution of up to 8 percent (4 percent automatic plus up to 4 percent matching), compared to the current 5 percent max.
- Receive a lump-sum benefit payment equal to 75 percent of the present value of accrued FERS benefits, no future FERS benefit, and higher TSP contributions (an additional 3 percent matching, up to 8 percent total).
- Eliminate FERS contributions for Federal employees with fewer than five years of service. Instead, they would receive a lump sum benefit of contributions they have made to FERS and receive an additional 3 percentage points in automatic TSP contributions. This would make them eligible to receive up to 8 percent in total government contributions.
- Placing new hires and employees with fewer than five years of service into a new retirement system.
If these or other proposals emerge as possible changes, we will provide summaries for FedSmith readers.
As of now, these last items are changes which have been suggested. Even if there is a formal proposal to change the existing system, most of these would require new legislation. Normally, in the legislative process, changes are usually made to the proposals and predicting what is likely to emerge is not yet possible.