Senior executives fear new salary rules will roll back job protections

The Senior Executives Association is lobbying Tom Davis, R-Va., chairman of the House Government Reform Committee, to urge the Office of Personnel Management to revise new regulations governing agency performance management systems.

SEA President Carol Bonosaro said she hopes Davis will intervene with OPM so that the new rules will provide an annual cost-of-living adjustment for senior executives who receive a rating of at least "fully successful."

Under regulations issued last month, agencies can use their discretion in determining whether or not to award raises to any executives. "It makes no sense," says Bonosaro.

The new regulations were issued to implement a section of the 2004 Defense Authorization Act, which eliminated the long-standing six-level pay schedule for senior executives and replaced it with a broad pay band. For years, the SEA has urged Congress to lift the pay cap for senior executives, previously $145,600, because of pay compression in the SES ranks. More than 70 percent of executives earn that salary.

Congress did that, raising the cap to $158,100. But at the same time, the law eliminated locality pay for senior executives and annual cost-of-living adjustments. And now, in order to raise base salaries above the old cap, agencies need to demonstrate to OPM that they have performance management systems that make meaningful distinctions between executives. No agency has yet received certification, though Bonosaro expects most will be able to access the new pay cap this fall.

Bonosaro said she was pleased that OPM had not set quotas on the number of executives who can earn top rankings. According to the most recent statistics, from 2002, agencies gave 75 percent of their senior executives top marks. Because many agencies use pass-fail systems, however, some of those top marks were simply passing grades. Under the new rules, agencies will have to adopt performance management systems that provide at least one grade above passing.

In addition, Bonosaro said she is happy that the new regulations do not require that agencies tie executive performance rankings exclusively to agency performance. Agencies will be allowed to consider mitigating factors that might have affected their performance, such as an inadequate budget. Bonosaro was also happy that OPM dispensed with interim regulations that required that an executive who did not receive a pay raise during the annual performance review to wait a year before being eligible for an increase. Now executives passed over at annual review time will not have to wait a full year for a raise if their performance or agency funding improves.

But Bonosaro worries that the new rules will allow agencies to essentially strip senior executives of job protections because they allow agencies to reduce an executive's pay by as much as 10 percent annually. Now, agencies may only reduce pay for underperforming executives by 5 percent a year. Under the rules, the executive could not appeal the 10 percent reduction to the Merit Systems Protection Board, a federal agency that reviews agency disciplinary decisions. An executive who is removed from the Senior Executive Service, by contrast, has avenues to protest the decision. Bonosaro argues that agencies should either remove executives who are badly underperforming, or allow them MSPB appeal rights to protest salary reductions.

Most of all, Bonosaro said, she worries that agencies will decide simply not to fund the pay raises. "Technically speaking, there is no requirement on them to give anyone a pay raise," she said. An informal survey of association members last year found them to be deeply divided over the changes to the SES pay system. Only a slight majority wanted to accept the elimination of cost-of-living adjustments for the increase in the SES pay cap. If it turns out that few SESers benefit from the new cap, Bonosaro says, "That's going to make this rapidly a system that has no credibility…. So I sincerely hope it doesn't, but there is no pot of money put aside for this."