SEC launches new pay system against union wishes

Employees and managers at the Securities and Exchange Commission will get pay raises of as much as 11 percent this week under a new pay system, but the union representing SEC employees isn't happy about the new system.

Under the new process, the SEC will spend $25 million more than it had planned on salaries for its 3,100 employees in fiscal year 2002. Most employees will get a 6 percent base pay increase, plus locality-based increases that will bump the pay hikes to 8 percent in Washington and 11 percent in New York. Employees in hard-to-fill jobs, such as attorneys, accountants, compliance examiners and managers will get higher raises. Managers, for example, will be paid under a special system that will give them a 6 percent higher salary than nonsupervisory employees at the same pay grade.

The new pay system also includes features that could be copied by agencies across government if civil service reformers have their way. Under the SEC system, employees will no longer receive tenure-based pay increases, known in government jargon as "within-grade increases." Instead, managers will have more discretion to base pay on performance appraisals.

The SEC is also creating its own pay tables, with 20 grades or levels, compared to 15 in the governmentwide General Schedule. Each of the 17 lowest grades will have between 21 and 31 steps, compared to 10 steps in each of the grades of the General Schedule. The more steps in a grade, the more flexibility a manager has in differentiating pay rates among employees.

The top three pay grades will cover the agency's executives. They will use broad pay ranges rather than the six-step system that most agency's use for senior executives.

SEC employees won't get more money right away, however. The Interior Department, which manages the agency's payroll, needs several months to make changes to its computer system. SEC employees will be paid lump sums retroactive to May 19 as soon as the payroll system is updated.

Union officials oppose the new pay system, arguing that it eliminates protections against cronyism and favoritism by placing too much discretion in managers' hands. National Treasury Employees Union President Colleen Kelley said the new SEC pay plan also gives too much money to managers and nonunion employees-and not enough to union employees. "SEC management is moving forward with a plan that is highly suspect," Kelley said. "It is a system that is front-loaded with a 6 percent pay increase, but fails to provide a framework for SEC employees to attain pay parity with other federal financial regulatory agencies."

Congress granted SEC the power to create its own pay system in January, after SEC officials complained for years that they were losing employees to the private sector and to other federal agencies, such as the Federal Deposit Insurance Corporation and the Treasury Department's Office of the Comptroller of the Currency, which offer higher salaries for similar work.

The agency and the union failed to reach an agreement on the pay plan by this weekend, so the SEC decided to proceed unilaterally with its pay plan. The union has asked the Federal Service Impasses Panel to step in and resolve the labor-management impasse.

The SEC also faces a hurdle in garnering funding for higher salaries for fiscal 2003. President Bush's fiscal 2003 budget doesn't include the $76 million that the agency estimates it needs to pay its employees higher salaries. But Brian Gross, a spokesman for the SEC, said congressional appropriators have been receptive to the idea of putting the extra money into the SEC's budget.

If the extra money doesn't get appropriated, then SEC officials say they may have to lay off 700 employees to avoid cutting pay to pre-May 19 levels.

This week's pay increases come on top of special pay raises of up to 18 percent made in March 2001 to attorneys and compliance examiners.