Performance Pay: A History

"It's time to push the civil service personnel system into the 21st century." That's the mantra being repeated by proponents of personnel reforms in the Defense and Homeland Security departments, which the Bush administration wants to extend across government.

Office of Management and Budget Deputy Director Clay Johnson recently told reporters that the problem with the current system is that it was designed for the clerk typists of the 1950s, not the information-age workers of 2005.

But as Office of Personnel Management Director Linda Springer said recently in a speech, in implementing pay for performance, the government is "not doing anything that's new, that hasn't been done by millions and millions of people for decades."

Springer was referring to private companies, but pay for performance isn't exactly a new concept in the federal sector, either.

A look back reveals that the notion of pay for performance in the federal civil service dates to 1954, with major developments occurring in both 1978 and 1989.

Here's a timeline, courtesy of the Merit Systems Protection Board's Office of Policy Evaluation:

1954: Incentive awards programs greatly expanded to encourage managers to reward outstanding contributions.

1962: Federal Salary Reform Act provides managers with the quality step increase to reward top performers.

1978: Civil Service Reform Act authorizes:

• Performance appraisal reforms.
• Large cash awards for employees.
• Merit pay and cash awards for GS-13 to GS-15 managers.
• Establishment of SES and performance incentives.
• Demonstration projects (e.g., Navy's China Lake Project in 1980).

1980-1982: Annual bonuses restricted to 25 percent of each agency's SES career members and later limited to 20 percent of the pool.

1984: Congress creates the Performance Management and Recognition System to replace merit pay for mid-level managers.

1989: Agencies covered by the Financial Institutions Reform, Recovery and Enforcement Act receive authority to develop their own pay systems.

1990: Concerns about pay causing recruitment and retention problems leads to Federal Employees Pay Comparability Act.

1993: Performance Management and Recognition System terminated.

1995: Performance management systems decentralized.

1995: FAA receives authority to develop a new compensation system.

1998: IRS receives authority to redesign its pay system.

2000: OPM decentralizes control of SES performance ratings.

2002: Homeland Security Act provides authority for DHS to design its own pay system.

2003: National Defense Authorization Act for Fiscal Year 2004 grants Defense Department authority to develop and implement a new pay system.

2003: Human Capital Performance Fund established.

2004: SES pay for performance plan implemented.