Federal Pay System Needs Reform, Top Officials Say

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By Louis C. LaBrecque

The labor secretary and other top administration officials are calling for “fundamental reforms of the white-collar Federal pay system” in what may be the clearest indication yet of the administration’s civil service agenda.

“Performance-sensitive compensation systems” are needed for a “more citizen-centered, results-oriented, and market-based” government, the chiefs of the Labor Department, the White House Office of Management and Budget, and the Office of Personnel Management wrote. “We need to empower Federal agencies to better manage, develop, and reward employees.”

The leaders’ "memorandum to the president” may signal a new period of labor strife, as the Trump administration and Republicans in Congress seek to change a system that’s fiercely defended by federal employee unions.

Government `Leading by Example’

Unions say the General Schedule system is equitable and transparent and that it prevents politicization of the civil service and discrimination by ensuring that pay is job-based.

“This is an area where the federal government is leading by example and others should follow,” Tony Reardon, president of the National Treasury Employees Union, told Bloomberg Law Dec. 29.

Most agencies are not using the pay flexibilities that are available to them under the General Schedule system, he said.

Detractors say the system doesn’t properly reward extra effort and that pay is increased automatically for most federal employees, regardless of their job performance.

`Concerns’ About Locality Pay System

Labor Secretary Alexander Acosta, OMB Director Mick Mulvaney, and Acting OPM Director Kathleen McGettigan made their broader comments about federal pay in a memo included with a required annual analysis of the General Schedule’s locality pay system. The analysis was released Dec. 22, two days after it was sent to the president.

The memo questions the methodology used to calculate the pay gap between federal and private-sector pay, which the locality pay system is designed to close.

Previous administrations have “expressed `major methodological concerns’ about the underlying model used to estimate the pay gaps,” Acosta, Mulvaney, and McGettigan wrote in the memo. “We share those concerns.”

“The value of employee benefits is completely excluded from the pay comparisons, which take into account only wages and salaries,” the three wrote. “Also, the comparisons of Federal vs. non-Federal wages and salaries fail to reflect the reality of labor market shortages and excesses.”

The heads of the DOL, OMB, and OPM together are responsible as the President’s Pay Agent for approving or rejecting recommendations from the Federal Salary Council. The council is an advisory group consisting of union representatives and “experts in labor relations and pay policy,” according to the memo from the three officials.

The NTEU represents a total of about 150,000 federal workers in 31 agencies, including the Internal Revenue Service.

The OPM and OMB didn’t immediately respond to a request for comment from Bloomberg Law.

To contact the reporter on this story: Louis C. LaBrecque in Washington at llabrecque@bloomberglaw.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bloomberglaw.com

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