Pay for Performance Complicates Matters

For many employees of the Defense Department, 2005 likely will mark the start of a different pay arrangement. The Defense Department is expected to announce soon its pay for performance plan under its new “national security personnel system” that will provide general schedule employees there with the locality component of the annual raise, but that will withhold the across the board component to create a pool of money to reward top performers. It’s expected that the system also will feature pay banding, meaning that the largely automatic within-grade raises also will be abolished and the funds used for those also would go into the performance pay pool. The pay banding and pay for performance systems are expected to affect 300,000 DoD employees, somewhat less than half the workforce, at the startup later this year. The Department of Homeland Security similarly plans a revised pay system-although for most employees not beginning until fiscal 2006-in which annual and within-grade raises would be replaced by a formula taking into account occupation, locality and performance.