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STRATEGIC COMPENSATION CONFERENCE 2002

Second Day Opening Plenary Session

Doris Hausser

United States Office of Personnel Management

A Fresh Start for Federal Pay: The Case for Modernization

  • (This slide includes the name and logo of the U.S. Office of Personnel Management.)

Federal Workforce of the 1940s

  • (This slide includes two black and white photos of 1940s clerks working with stacks of ledgers.)

A System Whose Time Has Come--and Gone

  • 1949 Classification Act
    • 70% of federal white collar jobs clerical work
    • Largely undifferentiated jobs
    • Expect long, stable career
  • 2001 Age of e-Government
    • Workforce highly specialized, knowledge workers
    • Expect to work for many employers
    • One size no longer fits all
  • (This slide includes a picture that combines 1940s clerical workers with modern employees.)

Strategic management of human capital requires
the strategic use of compensation.

  • Unfortunately, our current system does not support strategy very well.

Strategic Rewards

  • (This slide lists the following strategic rewards in a quadrant format. At the bottom of each quadrant are the words "Support Processes.")


  • Compensation
    • Base Salary
    • Variable Pay
    • Other Payments
    • Paid Time Off
  • Benefits
    • Health Care
    • Retirement
    • Savings
    • Other Insurance
  • Learning and Development
    • Training
    • Learning Experiences
    • Career Paths
  • Work Environment
    • Work/Life Balance
    • Leadership
    • Performance Culture
    • Organizational Climate

Stumbling Blocks
(side issues that will divert us from the path to change)

  • (This slide depicts blocks labeled as follows:)
    • Poor Performers
    • Funding
    • Pay Gap
    • Bargaining
    • Executive Pay

The White Paper

  • Reflect evolving use of pay to support strategic objectives.
  • Retain underlying values.
  • Get the classification system onto the screen.

The Federal Pay System:
Founded on Timeless Values

  • Openness
  • Merit System Principles
  • Procedural Justice

The Foundation of the Merit Principles

  • Equal Pay should be provided for work of equal value,
  • with appropriate consideration of both national and local rates paid by employers in the private sector,
  • and appropriate incentives and recognition should be provided for excellence in performance.
  • citation: 5 U.S.C. 2301(a)(3)

The Merit Principle on Pay

  • Equal pay should be provided for work of equal value,
  • with appropriate consideration of both national and local rates paid by employers in the private sector,
  • and appropriate incentives and recognition should be provided for excellence in performance.

We're Out of Balance

  • Internal equity is overemphasized. Job value--the position--is the primary determinant of pay. (The slide shows a graphic that depicts a meter pointing to high levels of internal equity.)
  • External equity is underemphasized. Pay should be more market-sensitive. (The slide shows a graphic that depicts a meter pointing to low levels of external equity.)
  • Individual equity is underemphasized. Pay should better reflect performance and results. (This slide shows a graphic that depicts a meter pointing to low levels of individual equity.)

A Rigid Connection

  • (This slide depicts a formula that shows that the Position Description and its classification points equal a GS Grade, which in turn equals Base Pay.)

Statutory Grade Definitions:
"A Hierarchy of Adjectives"

  • (This slide compares the classification language of a GS-11 to a GS-12, which can mean a difference of $9,000 or more in pay per year:)
  • For GS-11, "...work of marked difficulty" compared to GS-12, "...work of a very high order of difficulty."
  • For GS-11, "...work of considerable difficulty" compared to GS-12, "...work of marked difficulty."
  • For GS-11, "...requiring somewhat extended training and experience" compared to GS-12, "...requiring extended training and experience."
  • For GS-11, "...demonstrated important attainments" compared to GS-12, "...demonstrated attainments of a higher order."

The Changing General Schedule Workforce

  • (This chart shows a bar graph that compares the percentage of GS employees at each grade level in the years 1950 and 2000. The following information is depicted:)
  • GS-1: 1950 = 1.8%, 2000 = 0%
  • GS-2: 1950 = 14.5%, 2000 = 0%
  • GS-3: 1950 = 20.6%, 2000 = .5%
  • GS-4: 1950 = 14.8%, 2000 = 3.2%
  • GS-5: 1950 = 10.5%, 2000 = 8.4%
  • GS-6: 1950 = 4.3%, 2000 = 6.8%
  • GS-7: 1950 - 10.3%, 2000 = 10.2%
  • GS-8: 1950 = 2%, 2000 = 4%
  • GS-9: 1950 = 8%, 2000 = 10.4%
  • GS-10: 1950 = 1.2%, 2000 = 1.3%
  • GS-11: 1950 = 5.1%, 2000 = 14.7%
  • GS-12: 1950 = 3.8%, 2000 = 17.2%
  • GS-13: 1950 = 2%, 2000 = 13.8%
  • GS-14: 1950 = .8%, 2000 = 6.2%
  • GS-15: 1950 = .3%, 2000 = 3.2%

An Internal Point of View

  • Classification system designed at a time when entering federal service was a lifetime decision.
  • Comparisons tended to focus inward, i.e., inside the government.
  • Not much concern about external markets or competitors.

Since that time, issues about that external world and competitive labor markets have surfaced.

The System is Market-Insensitive

  • Pre-FEPCA: One nationwide General Schedule with few exceptions.
  • FEPCA: A major stride forward for external equity. Change was considered radical at the time.
    Locality based pay schedules.

External Equity Mechanisms

  • Special salary rates.
  • Recruitment and retention tools.
  • Demonstration projects.
  • Leave the title 5 system.

Cumbersome and piecemeal

FEPCA's Dilemmas

  • Only two dimensions are considered:
    • Grade level.
    • Location of the work.
  • Entails a lengthy process.
  • One "gap" per locality area.

Exploring the Gaps

(This slide includes a bar graph that depicts in percentages the overall pay gaps in various cities. The bar graph includes the overall pay gaps, which do not include existing locality payments.)

  • Boston: -40%.
  • Dallas: -34%.
  • Orlando: -29%.
  • San Francisco: -54%.
  • Washington DC: -35%.
  • Rest of the U.S. (RUS): -29%.

Exploring the Gaps

(This slide shows a stacked bar chart that depicts the percentage of the pay gap addressed by locality payments, the percentage of the pay gap that remains--or "remaining target,"--and pay within 5% of target. The chart visually shows that the "remaining target" is larger for each city cited than locality pay or pay within 5%. The data depicted in the chart follows. For all the cities listed below, the "Within 5%" bar is the same--5%; this data will not be repeated below.)
  • For Boston, locality payments=-12.13%, remaining target=-22.37%.
  • For Dallas, locality payments=-9.71%, remaining target=-19.29%.
  • For Orlando, locality payments=-7.71%, remaining target=-15.99%.
  • For San Francisco, locality payments=-16.98%, remaining target=-32.12%.
  • For Washington DC, locality payments=-10.23%, remaining target=-20.17%.
  • For the rest of the U.S., locality payments=-7.68%, remaining target=-15.82%.

Exploring the Gaps

(This slide shows a bar chart that depicts the percentage of the remaining pay gap. The data depicted by the graph follows.)

  • For Boston, remaining gap=-24.36%.
  • For Dallas, remaining gap=-22.16%.
  • For Orlando, remaiing gap=-19.47%.
  • For San Francisco, remaining gap=-31.76%.
  • For Washington DC, remaining gap=-22.82%.
  • For the rest of the U.S., remaining gap=-19.47%.

The Gaps Behind "The Gap"

(This slide shows a bar chart that depicts the remaining pay gap for various cities broken down by clerical, technical, administrative, and professional positions. The chart shows that the largest pay gap is in the professional positions. The data used for the graph follow.)

  • For Boston, remaining gap=-24.36%, clerical=-12.65%, technical=23.07%, administrative=-18.43%, and professional=-34.93%.
  • For Dallas, remaining gap=-22.16%, clerical=-6.88%, technical=-16%, administrative=-18.02%, and professional=-36.06%.
  • For Orlando, remaining gap=-19.47%, clerical=-0.74%, technical=-9.46%, administrative=-12.04%, and professional=-32.01%.
  • For San Francisco, remaining gap=-31.76%, clerical=-21.94%, technical=-27.8%, administrative=-27.88%, and professional=-39.35%.
  • For Washington DC, remaining gap=-22.82%, clerical=-11.06%, technical=-19.31%, administrative=-17.76%, and professional=-32.5%.
  • For the rest of the U.S., remaining gap=-19.47%, clerical=-0.2%, technical=-15.37%, administrative=-17.4%, and professional=-30.94%.

The Gaps Behind "The Gap"

(This slide shows the same bar chart as in the previous slide except the bar for the remaining gap is outlined instead of filled in so that it is easier to see the other data bars.)

The Gaps Behind "The Gap"

(This slide shows the same bar chart as in the previous two slides except the bar for the remaining gap is deleted.)

Overall, FEPCA is a Winner

  • Successfully implemented and administered a locality-based system.
  • Gained a better understanding of labor markets.
  • Developed experience in conducting and applying salary surveys.
  • Introduced market-oriented tools such as recruitment bonuses and retention allowances.
  • Learned that simplified approach to disparity would eventually and inevitably both overpay and underpay.

2002 General Schedule Pay Rates

(This slide includes the GS pay table for 2002. The data included in the table follows.)

  • GS-1: step 1=$14,757, step 2=$15,249, step 3=$15,740, step 4=$16,228, step 5=$16.720, step 6=$17,009, step 7=$17,492, step 8=$17,981, step 9=$18,001, step 10=$18,456.
  • GS-2: step 1=$16,592, step 2=$16,985, step 3=$17,535, step 4=$18,001, step 5=$18,201, step 6=$18,736, step 7=$19,271, step 8=$19,806, step 9=$20,341, step 10=$20,876.
  • GS-3: step 1=$18,103, step 2=$18,706, step 3=$19,309, step 4=$19,912, step 5=$20,515, step 6=$21,118, step 7=$21,721, step 8=$22,324, step 9=$22,927, step 10=$23,530.
  • GS-4: step 1=$20,322, step 2=$20,999, step 3=$21,576, step 4=$22,353, step 5=$23,030, step 6=$23,707, step 7=$24,384, step 8=$25,061, step 9=$25,738, step 10=$26,415.
  • GS-5: step 1=$22,737, step 2=$23,495, step 3=$24,253, step 4=$25,011, step 5=$25,769, step 6=$26,527, step 7=$27,285, step 8=$28,043, step 9=$28,801, step 10=$29,559.
  • GS-6: step 1=$25,344, step 2=$26,189, step 3=$27,034, step 4=$27,879, step 5=$28,724, step 6=$29,569, step 7=$30,414, step 8=$31,259, step 9=$32,104, step 10=$32,949.
  • GS-7: step 1=$28,164, step 2=$29,103, step 3=$30,042, step 4=$30,981, step 5=$31,920, step 6=$32,859, step 7=$33,798, step 8=$34,737, step 9=$35,676, step 10=$36,615.
  • GS-8: step 1=$31,191, step 2=$32,231, step 3=$33,271, step 4=$34,311, step 5=$35,351, step 6=$36,391, step 7=$37,431, step 8=$38,471, step 9=$39,511, step 10=$40,551.
  • GS-9: step 1=$34,451, step 2=$35,599, step 3=$36,747, step 4=$37,895, step 5=$39,043, step 6=$40,191, step 7=$41,339, step 8=$42,487, step 9=$43,635, step 10=$44,783.
  • GS-10: step 1=$37,939, step 2=$39,204, step 3=$40,469, step 4=$41,734, step 5=$42,999, step 6=$44,264, step 7=$45,529, step 8=$46,794, step 9=$48,059, step 10=$49,324.
  • GS-11: step 1=$41,684, step 2=$43,073, step 3=$44,462, step 4=$45,851, step 5=$47,240, step 6=$48,629, step 7=$50,018, step 8=$51,407, step 9=$52,796, step 10=$54,185.
  • GS-12: step 1=$49,959, step 2=$51,624, step 3=$53,289, step 4=$54,954, step 5=$56,619, step 6=$58,284, step 7=$59,949, step 8=$61,614, step 9=$63,279, step 10=$64,944.
  • GS-13: step 1=$59,409, step 2=$61,389, step 3=$63,369, step 4=$65,349, step 5=$67,329, step 6=$69,309, step 7=$71,289, step 8=$73,269, step 9=$75,249, step 10=$77,229.
  • GS-14: step 1=$70,205, step 2=$72,545, step 3=$74,885, step 4=$77,225, step 5=$79,565, step 6=$81,905, step 7=$84,245, step 8=$86,585, step 9=$88,925, step 10=$91,265.
  • GS-15: step 1=$82,580, step 2=$85,333, step 3=$88,086, step 4=$90,839, step 5=$93,592, step 6=$96,345, step 7=$99,098, step 8=$101,851, step 9=$104,604, step 10=$107,357.

2002 General Schedule Pay Rates

(This slide shows a chart depicting the pay ranges of each GS grade. The chart visually shows that the range is very narrow for the lower GS grades, and gradually expands as the grades get higher. GS-15 has the widest range of pay, which is $24,777. The data points for this slide were taken from the GS 2002 pay table, which was presented on the previous slide.)

The System is Performance-Insensitive

  • System's pay delivery mechanisms carry a strong message:
    "Performance doesn't matter."
  • Lots of latitude to measure performance.
  • Little latitude to deliver rewards strategically.

The Role of Performance in Pay Increases

(This slide includes a pie chart that shows that the general increase plus locality pay makes up over three fourths of pay increases. This slide also includes bullets that explain the pie chart. Below are the bullets.)

  • Total increase in payroll: 7.1%.
  • Over three-fourths of the total payroll increase was insensitive.
  • General increase and locality pay adjustment: 4.8%.
  • Over half of the remaining 2.3% of payroll increase was also insensitive to performance.

The Changing Face of Performance

  • Shift from process to results.
  • Changing nature of work:
    • Then: "Check your brains at the door."
    • Now: "Be creative."
  • Individual can make a difference.
  • Individual and organizational performance matters.

A Look Into the Future

  • Federal pay is more market sensitive.
  • Measures of workforce performance make trusted, credible distinctions.
  • Agencies have the expertise to plan for their human capital requirements and to make the business case for funding their strategic rewards.

Still Need Sensible Pay Delivery Mechanisms

  • To align rewards with values and strategy.
  • To let competencies and performance drive pay.
  • To create opportunities for substantial variable (non-base) pay.
  • To achieve fairness by considering multiple dimensions.



This page can be found on the web at the following url: http://www.opm.gov/compconf/postconf02/plenary/hausserP.asp

 
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