Senior executives may wait months for new pay rates to kick in

It may take several months for members of the Senior Executive Service to benefit from increased pay rates authorized by Congress last fall.

Currently, the SES cap is $142,500, including locality-based pay. Under new rules included in the 2004 Defense Authorization Act, locality pay is eliminated, and agencies can pay their senior executives up to $154,700.

Congress raised the pay cap to relieve pay compression in the upper echelons of the civil service, which has left 70 percent of all senior executives earning the same salary. But for agencies to implement the new rates, the Office of Personnel Management must certify that they have developed new performance management systems that tie executive compensation more closely to job performance.

The Senior Executives Association, which represents top managers, lobbied hard for raising the cap. But SEA counsel Bill Bransford says agencies may not be able to get their performance management systems certified by OPM until this spring at the earliest -- despite the fact that Congress authorized the new SES pay system to go into effect on the first pay period of 2004, which for most employees is Sunday, Jan. 11.

"It's very frustrating, because agencies are supposed to have the ability to award salaries up to [$154,700], but no one can do it," Bransford said. "No agency has certification, and no agency can have it until [regulations] are out there developed by OPM."

Doris Hausser, the chief policy adviser at OPM and the agency's chief human capital officer, said she could not set a target date for release of the new regulation because Congress required that OPM work jointly with the Office of Management and Budget to set the new rules. "There are policy issues that have to be addressed, and we have to be very careful about this. It is a major change," she said.

Among the issues to be resolved, Hausser said, is whether OPM will allow some agencies that have not implemented adequate performance appraisal systems to move ahead with provisional certifications based on promised improvements. In addition, OPM and OMB have not determined how long certifications should last before they have to be renewed. Another issue involves the treatment of Senior Foreign Service officers under the new system. By law, Senior Foreign Service officer pay is linked to that of SES members. But Senior Foreign Service officers overseas do not receive locality pay, so the rate of pay of those serving in foreign countries on Jan. 11--which could be used to determine their base pay under the new system--is lower than that of their Washington counterparts.

The American Foreign Service Association expressed concern last month about how Senior Foreign Service officers might be treated under the new system. Hausser said OPM would seek to treat them the same way that SES members on temporary overseas assignments are treated.

Under interim rules released Friday, senior executives stationed overseas, in Alaska, Hawaii, or a U.S. territory, will receive a one-time locality pay adjustment when they return to a position in the continental United States.

Hausser said OPM and OMB were doing their best to have further regulations out "as soon as possible," and they were taking every step to ensure that agencies would know exactly what they need to do to receive certification upon release of the regulations.

Still, Bransford said the situation was exasperating because OPM and OMB were ordered by Congress to develop such regulations in November 2002, when Congress passed legislation creating the Homeland Security Department.

Meanwhile, Bransford said senior executives are waiting anxiously to see if they will receive pay increases this year. Although most federal employees will almost certainly receive a 4.1 percent pay raise this year, senior executives will receive raises only at the discretion of their agency employers. The maximum raise for them will likely be 2.2 percent.

To add insult to injury, if senior executives do receive a raise this year prior to implementation of the OPM regulations and pay cap increase, they may not be able to benefit from the new cap until at least January 2005 because federal employees are barred from receiving more than one raise per year.

The one-raise-a-year limit is meant to prevent employees from receiving more than one promotion in a year, and the annual pay raise is exempt. But SEA President Carol A. Bonosaro said her interpretation of OPM guidance sent out in December indicates that the senior executive pay raise counts against the limit because this year, for the first time, it is discretionary and based on performance, not a standard annual pay increase. Bonosaro said SEA was encouraging OPM to lift the requirement that agencies only raise salaries once a year. OPM's Hausser, however, denied that a decision had been reached, and said the agency would resolve the question when it releases the regulations later this year.