VA employees to test out pay for performance

The Veterans Affairs Department is launching a pilot project that will replace the decades-old General Schedule pay system with one that more closely ties pay to performance.

On June 18, VA announced that it would place 150 employees at the Veterans Health Administration under a pilot pay-for-performance system for at least the next five years. The plan will cover employees in the health systems administrator job series at the GS-14 and 15 grade levels, with the first performance-based pay adjustments awarded in January 2010.

The Office of Personnel Management said in the Federal Register that the General Schedule has limited options for recognizing superior performance, and that VA would like to use the human capital accountability and assessment framework to tie annual increases directly to job performance.

The process would eliminate the fixed steps that give automatic pay raises to employees and instead make annual pay adjustments performance-sensitive, according to the OPM notice. Like other alternative pay experiments across government, pay pool adjustments would be funded from a kitty with money that would otherwise be used to fund the annual GS pay adjustment, quality step boosts and within-grade increases.

"By regularly rewarding better performance with better pay, the participating organization will strengthen the results-oriented performance culture," wrote OPM. "Among other things, they will be better able to retain their good performers and recruit new ones."

Lawrence Bifareti, director of workforce planning and organization development at VHA, said in December that the agency already had implemented a five-tiered performance management system instead of the pass-fail systems many agencies use. At the time he said tying such ratings to pay was the agency's next step.

According to OPM, federal agencies have the authority to place up to 5,000 employees in pay-for-performance demonstration projects. OPM must approve the projects and cannot manage more than 10 at any one time.

Currently, pay-for-performance pilots are active in three federal agencies -- the acquisition component at the Defense Department, and the Commerce and Energy departments. The Agriculture Department announced in May that it planned to test pay for performance for 2,900 employees at the Food Safety and Inspection Service.

Written comments on the proposal must be submitted by July 18, and can be sent by e-mail to demoprojects@opm.gov. A public hearing on the plan is scheduled for Aug. 5 at VA headquarters in Washington.