Salary council discusses 2009 raise, pay gap data

The Federal Salary Council on Tuesday unanimously recommended granting civilian employees an across-the-board raise of at least 2.9 percent in 2009.

Employees would receive the rest of their annual pay hike in the form of locality increases that would be higher in geographic regions with the largest gaps between government and private sector salaries. Much of the council's agenda focused on how those pay disparities should be computed.

Specifically, the panel explored whether anomalies in private sector salaries -- such as large increases in incentive pay -- should factor into the calculations. The discussion was sparked by the discovery that large incentive payments last year contributed to a 6 percent increase in the gap between salaries of GS-12 administrative employees in the "rest of U.S." region and their private sector counterparts.

"Those incentives have been included in the past," said George Nesterczuk, vice chairman of the council. "We have no idea what kind of distortions they introduced."

Nesterczuk said incentive pay should be included only in the calculations for jobs where private sector employees can take on more work for more pay, but without a guaranteed salary.

But National Treasury Employees Union president Colleen Kelley said that would amount to manipulation of the data.

"I think we would all say that the current system is not perfect, but it is transparent," Kelley said. "We have never reached in and changed the data to force it into a formula for future years. We have not made what I would call knee-jerk reactions in the past to changes in data points.…Obviously, these incentive payments have been in the data for years, and we should watch them closely."

Philip Doyle, assistant commissioner for the Office of Compensation Levels and Trends at the Labor Statistics Bureau, agreed with Kelley. The companies included in the calculations rotate annually, minimizing the effect of incentive pay on long-term results, he said.

The council voted unanimously to include incentive pay in the data for 2009, but asked a working group to explore how salary anomalies and outliers affect federal calculations.

Doyle noted that BLS' budget under the continuing resolution to fund agencies through March will not allow for an expansion of the National Compensation Survey on which locality pay calculations are based. If the Bush administration's fiscal 2009 budget is adopted eventually, the sample size for the survey would have to shrink, he added.

Nesterczuk said he was concerned that a smaller sample would only magnify the effect of outlier salaries and make the calculations more volatile.

The bureau's limited resources put several other reforms on hold. Doyle said BLS cannot provide the Federal Salary Council with pay estimates for certain scenarios, including expanding locality pay to Alaska, Hawaii and U.S. territories.

"We would certainly welcome additional funding," Doyle told the council.