Pay for performance debate centers on incentives

While lawmakers and the Obama administration continue to wrangle over how best to implement new federal pay-for-performance systems, some employee representatives say the salary structure already in place in most of government is sufficient for rewarding performance.

"The General Schedule system that's been in effect for a while has ways of rewarding good performance that don't get used," said Terry Rosen, a labor relations specialist with the American Federation of Government Employees.

Those incentives include cash rewards and expedited within-grade increases -- also known as quality step increases.

An April 3 letter eight Democratic lawmakers sent to Office of Management and Budget Director Peter R. Orszag asked the administration to halt the use of pay for performance programs for new federal hires, and to suspend temporarily the implementation of any new programs until a review was conducted. The administration recently put the brakes on the Defense Department's National Security Personnel System, pending review.

The lawmakers claimed in the letter that pay-for-performance systems were unnecessary and contributed to low morale and discrimination among workers.

The Democratic House leaders asserted that a "well-designed performance management system can recognize and reward high performance without a linkage to compensation." But Marcus Williams, press secretary for the oversight panel's federal workforce subcommittee, said the lawmakers currently do not have any alternative proposals.

"An alternative system cannot be proposed until the review is received," Williams wrote in an e-mail message.

Meanwhile, Rosen said AFGE opposed current pay-for-performance systems that don't include an overall increase in funding, claiming they only shift money among employees based on "minute and artificial distinctions."

"We're certainly against any system that just rearranges the current pot of money," Rosen said. "If there is going to be some sort of pay-for-performance system, it has to mean more money [overall]."

Ever since the Bush administration pushed for pay-for-performance measures in its legislation to create the Homeland Security Department in 2002, AFGE has argued that a new systems are unnecessary. Officials at the union say current incentives embedded in the General Schedule just need to be better funded.

Existing federal guidelines allow managers in most departments to award cash bonuses and pay increases for exemplary performance, according to the handbook Human Resources Flexibilities and Authorities in the Federal Government, published by the Office of Personnel Management and last updated in January 2008.

For instance, a department can give a highly rated employee a cash bonus of up to 20 percent of the employee's salary, according to the handbook.

Most agencies also can award a bonus of up to $10,000 to an employee for an outstanding accomplishment -- or up to $25,000 with approval from OPM, and more than $25,000 with the president's approval.

Additionally, an agency can expedite an employee's progress with QSIs within pay grades in the GS system. These increases can be granted only if the employee has the highest possible ranking in a performance appraisal. Employees are eligible for one such boost per year. The step increases cannot be given to workers in the Federal Wage System.

Employees can receive paid time-off as an award as well.

Representatives from the Office of Personnel Management said they did not know how often these incentives were used.

Those who favor creating a new system with more flexibility -- such as John Palguta, vice president for policy at the nonprofit Partnership for Public Service -- said existing incentives are not flexible enough.

"The tool set was very limited," he said, referring to his federal government career, which spanned more than 30 years. "I had a sledgehammer, and sometimes I wanted a ball-peen hammer."

Palguta said he supported a system that was "sensitive" to performance, without being too tied to arbitrary measurements.

"It's not possible, unless you're on an assembly line, to be completely objective," Palguta said. "There has to be an element of judgment that is applied. That's why you have to have good managers. They can assess the things that can't be counted."

Others argued that job satisfaction and commitment rather than money will drive people to perform well.

"There's research that shows that what makes people stay until 11 p.m. is not that they're getting a monetary bonus, but it's because they're committed and devoted to their job," said Kathryn Newcomer, a professor of public policy at The George Washington University.

OMB did not comment on the lawmakers' April 3 request, but said it is crafting a response.