The one-size-fits-all system

For the past 20 years, a handful of federal agencies have experimented with "pay banding" compensation systems. More agencies might launch pay banding systems in the next few years, under a Bush administration proposal that will soon arrive on Capitol Hill. That means that fewer and fewer employees are likely to be paid under the General Schedule, the federal government's primary classification and compensation system. In next week's column, we'll examine how pay banding systems work. Under pay banding, job classifications are widened into a few broad categories with increased salary ranges. This week, we'll look at how the General Schedule works. The General Schedule sets the upper and lower limits of base compensation for hundreds of thousands of federal employees. This year, base pay ranges from $14,144 to $103,623. That overarching salary range is divided into 15 grades. GS-1, for example, includes salaries ranging from $14,144 to $17,819. GS-15 includes salaries between $79,710 and $103,623. Each grade has 10 steps that mark specific salaries. A manager can set salaries only at the steps listed in the government's pay table. So, while the GS-15 salary range covers 23,913 dollar amounts, only 10 of those dollar amounts ($85,024 at Step 3, $95,652 at Step 7, for example) are available for salaries under the General Schedule. A manager could not set a salary at, say, $79,750, because it is not one of the 10 options in the GS-15 salary range. Employees who enter a grade at Step 1 automatically progress to Step 2 a year later as long as they receive a performance rating of at least Fully Successful (3 on a 5-point scale). Fewer than 1 percent of federal workers were rated below Fully Successful in 1996, the last year for which governmentwide statistics are available, so step increases are almost guaranteed. After 18 years of good performance ratings (which almost every federal employee gets), an employee can progress from Step 1 to Step 10. Promotions and great performance evaluations can move employees up the ladder even faster. But the step increases coupled with annual across-the-board salary increases mean almost every GS-7, Step 1 employee in 2000 received a 6.1 percent base pay hike in 2001. That includes a 2.7 percent across-the-board increase and the automatic jump to GS-7, Step 2. Doris Hausser, the Office of Personnel Management's assistant director for performance compensation systems design, said some federal managers wish they had the ability to give, say, a half-step increase to low-performing workers or a one-and-a-half-step increase to high-performing workers. "You can't do that" in the General Schedule, Hausser says. "It's not there to be done." In addition to setting salary levels, the General Schedule is the foundation of the government's classification system. Program managers and classification specialists from human resources offices work together to develop job descriptions and then rank jobs on the salary table. The back-and-forth between managers and classifiers can be time-consuming, since agencies have developed a large number of rules that decide where jobs should be classified on the schedule. Overall, the General Schedule is designed to make sure that people doing the same work get the same pay. In human resources circles, that's known as internal equity. Many federal employees say that people doing the same work in different agencies often earn different salaries, suggesting that the General Schedule doesn't always work as intended. Critics of the General Schedule say that the system prevents managers from rewarding high performers and punishing poor performers. The General Schedule rewards longevity rather than performance, the critics say. Supporters of the system point out that performance recognition is built into step increases. The problem, they say, is that managers don't take advantage of the ability to use the step increases to reward or punish employees. The critics are making the most noise these days, prompting the Bush administration to propose giving agencies the ability to use pay-banding systems rather than the General Schedule. No agencies would be forced off the General Schedule, and agencies would be expected to design tailored pay-banding systems. To learn about some pay-banding systems already in place, see Pay and Benefits Watch next week.