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Attachment to Memorandum for Directors of
Personnel (CPM98-4)
Governor William J. Sheffield
Dear Mr. Chairman: The President's Pay Agent has carefully considered the views and recommendations of the Federal Salary Council on the use of National Compensation Survey (NCS) data in recommending locality pay adjustments under the Federal Employees Pay Comparability Act of 1990. We believe the NCS program has several advantages over the previous salary survey program, including being less costly, being less burdensome on respondents, and offering greater occupational coverage. However, after evaluating the test surveys and the first round of the pilot surveys, we have concluded that certain major aspects of the NCS program, including some of those raised by the Federal Salary Council, would have to be improved before we could use NCS data for making pay comparisons under the locality pay program. Therefore, we do not plan to use NCS data for the purpose of making recommendations to the President later this year regarding the locality payments that would be received by covered Federal employees in January 2000 if such payments were made in accordance with 5 U.S.C. 5304. In consultation with the Federal Salary Council, the Pay Agent will work with the Bureau of Labor Statistics to ensure that surveys conducted under the NCS program will be suitable for making pay comparisons under the locality pay program. As you know, the Administration, under the leadership of the Office of Personnel Management, is committed to developing a credible alternative to the current annual pay adjustment process and also to proposing legislative changes to achieve a modernized performance-oriented system of total compensation that can adapt to a variety of missions, structures, labor markets, and work technologies and keep total costs apparent to managers who are held accountable for managing those costs. Much has changed in the field of employee compensation during the past decade. Many employers have reevaluated and refined their compensation systems to ensure that they are more market-sensitive. These new systems often incorporate features designed to meet organizational goals. In addition, there has been a slow, but steady increase in the number of skill- or competency-based pay systems. Given these developments, it has become increasingly difficult to continue to operate a pay adjustment system that is based on comparisons of pay for the same "levels of work." We are counting on the valuable insights of members of the Federal Salary Council, as well as other key stakeholders, in developing proposals for changing the Federal compensation system. It is important for all to recognize that the outcome of these efforts may very well dictate an entirely new approach to adjusting Federal pay rates in the future. In the short term, however, we need the Council's advice concerning suitable alternatives to the use of NCS data for the purpose of carrying out our statutory responsibility to make recommendations regarding locality payments in January 2000 under the current law. Given our decision not to use NCS data for this purpose, we are obliged to use data from the most recent surveys conducted under the former Occupational Compensation Survey Program (OCSP). For the year 2000, at least two options now appear to be available: (1) use the local pay disparities calculated for the purpose of the Pay Agent's 1997 report to the President; or (2) use appropriate rates of change in the nationwide Employment Cost Index to update OCSP data, and recalculate the pay disparity in each locality pay area on the basis of March 1998 Federal employment information. We would be happy to consider other options that may be suggested by the Council. The Pay Agent's staff is ready to assist you in forming your recommendations for locality payments in January 2000 and in exploring options for the future. Thank you for your work in support of the locality pay program.
Last Modified: 3:38:09 PM on Wednesday, August 20, 2003 |
