Pay reform means smaller raises at DoD

By TIM KAUFFMAN
Source: Federal Times.com

Many of the 110,000 Defense Department employees covered by the new performance-based pay system won’t be getting the raise they think they will in January.

That’s because Defense Secretary Robert Gates has decided not to award them the same across-the-board, cost-of-living pay raise that other federal employees will receive. In 2008, that raise is expected to be 3.5 percent.

Instead, employees covered by the National Security Personnel System (NSPS) will get an across-the-board raise half that size. The money that would normally pay for the other half of that raise will instead go into a separate pot to fund performance-based pay increases.

Pentagon offices were notified early this week of the decision, which comes as a shock to many employees who were told they would receive their normal across-the-board pay raise in January plus an additional performance raise.

“We had been told all along [that] those moved into NSPS early [this year] would get the full cost-of-living raise,” said an Army Corps of Engineers employee who asked not to be identified. “They have changed their minds.”

Most employees haven’t completed a full year under NSPS, meaning some may see an adverse impact on their pay as a result of appraisals that do not reflect a full year’s work.

During mock exercises this spring to test the performance-appraisal and pay-setting process, offices were told to exclude the general pay raise from the calculation. Many assumed, erroneously it turned out, that this was because the full pay raise would be distributed to all employees, just as it was this year.

In a set of questions and answers distributed to offices, the Pentagon acknowledges that employees were told to expect the full pay raise in January and that it now appears officials have changed their minds. However, officials simply had not decided at that point how to address the governmentwide increase, the Pentagon says in response. It is at the secretary’s discretion each year whether to include any or all of the base pay raise in the pay pool used to set performance-based increases.

“The department now has broader experience with a pay-for-performance system than it had when first implementing NSPS,” the Pentagon said in the questions and answers it distributed throughout the department. “Based on our experience with the first performance cycle under NSPS, department leadership is ready to take this incremental step with a more robust pay-for-performance system.”

How the 2008 raises will work

Under the new payout, employees performing above the unacceptable level will receive half of the base pay raise given to General Schedule employees, plus the full locality increase that goes to all employees. The remaining half of the base pay raise will go into the performance pay pool.

It’s uncertain at this point how much of a guaranteed increase Defense employees under NSPS will receive. If Congress approves a 3.5 percent increase, as appears likely, it will be up to the White House to determine how much of that increase will be divided between an across-the-board raise and a locality increase.

Assuming the base raise is set at 3 percent, NSPS employees rated above unacceptable would receive half of that, or 1.5 percent, plus the 0.5 percent locality raise that will vary based on where employees work. The remaining 1.5 percent would be added to performance pay pools and distributed based on individual performance.

By carving out part of the across-the-board pay raise for performance increases, some employees rated as valued performers — a 3 out of 5 — could end up receiving a smaller pay raise than they would have under the General Schedule, depending on how the performance raises are allocated.

Last year, 97 percent of the 11,000 employees who had been evaluated at that point under NSPS received either a performance-based pay raise or bonus, or both, in addition to the across-the-board pay raise.

Pentagon employees not under NSPS will continue to receive the full increase that goes to other General Schedule workers. In addition, about 90,000 employees who will be transferred to NSPS in November also will receive the full 3.5 percent across-the-board raise.

Labor-management changes on hold

So far, personnel rules changes under NSPS have been limited to pay and performance appraisals affecting nonunion employees.

That’s because of opposition from unions and some lawmakers to other changes concerning how disciplinary actions and labor-management disputes are handled.

Although the department won a key victory in a federal appeals court recently that upholds the planned changes to the department’s labor-management rules, the Pentagon disclosed on its Web site Sept. 11 that it has “no plans to implement the adverse actions, appeals and labor relations portions of NSPS at this time.”

Union leaders have been worried that the department would push forward with the new rules, which were upheld in an appeals court ruling but continue to face stiff opposition from unions and an uncertain future in Congress.

Richard Brown, president of the National Federation of Federal Employees, said the Pentagon likely is holding off until Congress completes its work on the fiscal 2008 Defense authorization bill.

The House-passed version of the bill would prevent the department from curbing employees’ collective bargaining rights or overhauling the process used to appeal adverse or disciplinary actions. The Senate’s version, which hasn’t been approved by the full Senate yet, would restore collective bargaining rights and exempt blue-collar workers from the system, although it doesn’t address the appeals process.

“I believe they are doing the right thing in holding off implementation for a while,” Brown said in a statement. “It would be unfair to make collective bargaining agreements null and void when restoration of bargaining rights is very likely to be restored by Congress in coming months. Waiting to see how the legislation pans out is the responsible thing to do.”

The House measure would not prevent the Pentagon from transferring employees from the General Schedule to a performance-based pay system, although the Pentagon first would have to negotiate terms of such a move with unions.

The Pentagon said it has no plans to move any union employees into NSPS in 2008. The department plans to move 90,000 nonunion employees into the system next year, however, which would bring the total number of employees under the new pay rules to 200,000. Ultimately, the system could cover roughly 650,000 employees.