Three-Way Pay Split

The 2.2 percent pay raise for federal employees recommended by President Bush in his 2007 budget only represents the average boost he'd like to provide. For years, a portion of the raise has been doled out based on where employees work, meaning that true pay raises can range widely.

This year, the 2.2 percent figure could become even more meaningless. That's because the president is proposing to slice the pay raise into three portions, rather than two.

Bush's 2007 budget, released Monday, calls for allocating part of the 2.2 percent based on "special rate increases." What that means, according to Donald Winstead, the Office of Personnel Management's deputy associate director for pay and performance policy, is that agencies would pay more for employees with high recruitment and retention value.

Right now the annual pay raise is untouchable for agencies seeking more money to cure their recruitment and retention problems; it's a given for all employees. The president's proposal, which requires legislation, would change that.

Winstead said the details have not been fully developed yet. He said special rate increases could be based on "occupations, grade levels [or] locations where the government is experiencing or likely to experience significant recruitment or retention problems," but the "exact procedures" for deciding who would qualify for these special increases have not been determined.

One thing OPM was clear about was the motivation behind this move. In a statement, the agency said, "This proposal is designed to send a signal that the federal pay adjustment process should be 'smarter' -- i.e., more strategic and market-sensitive."

That philosophy is peppered throughout the budget. For example, it includes $2.1 million in new funding for OPM to "lay the groundwork for market-based compensation and further develop performance management."

The market-based compensation money would not be used to fund actual market surveys, but rather to conduct training and analysis to prepare for that eventuality, said Nancy Kichak, OPM's associate director for strategic human resources policy.

As for performance management, Kichak said OPM would use that money to "to work with the agencies under the President's Management Agenda to get performance plans in place."

The three-way split and the push toward market-based pay and performance management will put the government on track to modernize pay practices at all agencies. The Homeland Security and Defense departments already have congressional authority to do so, and have designed performance-based pay systems. Bush wants to extend reforms to the entire government and last summer floated a legislative proposal aimed at accomplishing that.

In his 2007 budget, Bush encouraged lawmakers to adopt that proposal, called the Working for America Act.

"The administration will work with the Congress to enact this important legislation to allow federal employees to be thought of and treated as the professional public servants they are, and to enable the government to make better use of its human capital resources to produce results for the American people," the budget stated.

So far, no members of Congress have volunteered to sponsor the bill; many say they are waiting to see how the performance-based pay systems in the Homeland Security and Defense departments work out. But that's not stopping the president from moving ahead in that direction.