Pay reforms said to need scrutiny, care-taking

New agency pay-for-performance initiatives are highly vulnerable to bias and need extra evaluation and money to succeed, several witnesses told a House subcommittee on Tuesday.

Human capital experts and union representatives pointed to pay systems at the Securities and Exchange Commission and the Internal Revenue Service to make their case before the House Oversight and Government Reform Subcommittee on the Federal Workforce.

In September 2007, an arbitrator ruled that SEC's new pay system held vague and subjective performance requirements and discriminated against African Americans and employees age 40 and over. Meanwhile, employees have demonstrated little buy-in for pay reforms at the IRS.

"The implementation of these systems must be evaluated with the same intensity that the Bush administration, and other pay-for-performance proponents, advocated that these systems be implemented," said subcommittee Chairman Danny Davis, D-Ill.

Richard Spires, IRS deputy commissioner for operational support, said despite some setbacks, pay for performance was making his agency more effective. But Diego Ruiz, SEC executive director, told the committee that SEC planned to suspend pay for performance until the agency could fully implement a sound performance management system.

Max Stier, president of the nonprofit Partnership for Public Service in Washington, agreed with the claims about the impact of pay for performance, noting that the government must replace the decades-old General Schedule to gain a more competitive edge in the war for talent. He cautioned lawmakers against moving back to the GS system, noting that doing so would likely have greater costs than benefits. "None of the alternative personnel systems has been 'magic bullets,' but over time, most have been improvements over what existed previously."

But Colleen Kelley, president of the National Treasury Employees Union, said the GS system could be performance-based if implemented properly. She said the administration has moved quickly to implement "ill-conceived" and costly pay-for-performance systems without first requiring agencies to use existing flexibilities such as telework and student loan repayment programs available under the GS system.

Witnesses also testified that employee performance criteria must be validated by Congress, employees and employee representatives to ensure systems will be age and race neutral. But Charles Fay, a professor of labor and management relations at Rutgers University, said validating every employee's performance appraisal would be a daunting task.

Del. Eleanor Holmes Norton, D-D.C., said similar private-sector pay reforms have resulted in litigations, with the validation of performance criteria costing companies millions of dollars. "It'd be a waste of taxpayers' money," she said.

Money for pay raises -- or lack of it -- is at the root of the government's problem with implementing pay for performance, according to Charles Tiefer, a professor at the University of Baltimore School of Law. "You have to rob Mary to pay Peter and Paul," he said. "If you don't put money into it, you don't have any net winners or losers."

Reports of higher pay increases for employees under the Pentagon's new pay-for-performance system are misleading, said John Gage, president of the American Federation of Government Employees. He argued that because Defense was using the same amount of funds for pay raises as it did under the General Schedule, employees receiving acceptable ratings must take lower raises in order to fund higher raises for those at the top.

Gage urged the committee to demand data from the Pentagon that described the distribution of pay adjustments, including the age, gender and race distribution of employees subject to each pay pool.

Davis questioned whether it was reasonable for Congress to intervene in every agency's pay-for-performance attempt to ensure the systems are fair, equitable and have employees' support. "This leaves the subcommittee with no choice but to legislate and effect change," he said.

Norton called for a cautious approach to pay for performance in the federal government. "Before the end of this year, we have to find a way to roll back pay for performance so we do not subject ourselves to inevitable litigation or lose federal employees at the height of when we're trying to keep them," she said.