A report from senior administration officials signals that the long-running battles over federal pay raises will continue this year, again focusing on whether comparisons with the private sector should take benefits into account and whether raises should have a stronger performance element.
The President’s Pay Agent report—dated November 30 but only recently released—says it has “major methodological concerns” about the annual conclusions by a lower-level body that federal employee salaries lag those of comparable private sector jobs by more than 30 percent. The Pay Agent—the heads of OMB, OPM and the Labor Department—reviews the work of the Salary Council, which consists of federal union representatives and White House-appointed pay experts.
At its meeting last fall, the Salary Council split over whether major changes are needed in those comparisons, as advocated by the White House appointees. The union members stressed that the law calls for comparing only salaries and said that including the value of federal employee benefits—which were assumed to be superior—would be used to justify reducing those benefits. That group ultimately took no position but the Pay Agent report calls for changes.
“The value of employee benefits is completely excluded from the pay comparisons, which take into account only wages and salaries,” it says. “Also, the comparisons of federal vs. non-federal wages and salaries fail to reflect the reality of labor market shortages and excesses. They also require the calculation of a single average pay gap in each locality area, without regard to, for example, the differing labor markets for major occupational groups . . . we find the overall scale of the pay disparities presented to us each year using the current locality pay methodology lacks credibility.”
“It is important to appropriately compensate personnel based on mission needs and labor market dynamics. The existing GS compensation system fails in this regard,” it adds. “Ultimately, we believe in the need for fundamental reforms of the white-collar federal pay system. We believe it is imperative to develop performance-sensitive compensation systems that will contribute to a government that is more citizen-centered, results-oriented, and market-based. We need to empower federal agencies to better manage, develop, and reward employees in order to better serve the American people.”
Similar language has been in budget plans from the Trump administration—including last year’s proposal to freeze salary rates while creating a $1 billion fund to reward top performance and pay incentives for high-demand occupations. The administration never explained in detail how it would use such a fund, however, and Congress did not actively consider it.