Why Trump’s Performance Pay Fund Won’t Happen in 2019

The release of President Trump’s fiscal 2019 budget proposal confirmed a rumored civilian federal employee pay freeze, but the accompanying effort to institute pay-for-performance through a $1 billion interagency fund to reward high performers came as a surprise for some observers.

Not much is known about the new fund or whether it is even feasible. The budget documents only described the program—which will rely on fiscal 2018 appropriations—as “a new workforce fund that directs recruitment and retention incentives towards top performers with mission-critical skills.”

According to the budget documents, the total cost of wages for non-U.S. Postal Service executive branch employees was $190.2 billion in fiscal 2017. An across-the-board 1.9 percent increase of that figure—in accordance with the raise approved by Trump last December—would equate to an additional $3.6 billion, more than triple the funding included for the performance-based pay fund.

The White House justified its proposal to freeze “tenure-based” compensation increases by saying the current system does not allow agencies to address existing pay disparities or their recruitment and retention goals.

“The existing federal salary structure rewards longevity over performance,” officials wrote. “This is most evident in the tenure-based ‘step-increase’ promotions that white-collar workers receive on a fixed, periodic schedule without regard to whether they are performing at an exceptional level or merely passable (they are granted 99.7 percent of the time).”

Assuming the administration uses the same performance appraisal system and distributes raises from the $1 billion fund to all federal employees who are evaluated to be at least "fully successful," each worker would receive, on average, an additional $481 in 2019.

On Monday, National Treasury Employees Union National President Tony Reardon decried the plan to change how raises are distributed, as well as efforts to make it easier to discipline or fire federal workers.

“The General Schedule has built-in provisions to reward good employees and deal with poor performers,” he said. “The real problem is that federal managers are not trained in their use, or simply decide not to use them, or Congress has not provided agencies with the funding to do so.”

Jessica Klement, legislative director of the National Active and Retired Federal Employees Association, said the new fund is far from a done deal, even if it is paid for with fiscal 2018 money.

“Those two proposals are on very, very different legislative paths,” she said. “They can tie them into one, but while the pay freeze happening seems all but certain, the chances of this fund are highly unlikely. This would be performance management, and you need legislation to do performance management.”

The budget also noted that “more than 99 percent of employees are rated as fully successful or higher” in evaluations by managers. If the current system of evaluating federal workers results in nearly all of them being rated high performers, the Office of Personnel Management or individual agencies would need to devise, evaluate and implement a way to determine which employees deserve the new performance rewards.

Robert Tobias, distinguished practitioner in residence at American University’s Department of Public Administration and Policy and a former president of the National Treasury Employees Union, said setting up pay for performance in this fashion is approaching the issue from the endpoint and going backward.

“More fundamentally, a pay-for-performance system has to have an evaluation system that is perceived as fair and accurate—if the only way I can get a pay increase is based on my evaluation, I want it to be fair and accurate,” Tobias said. “But agencies have talked for years and years and years about creating fair and objective evaluation systems, and they don’t have it. They’ve never done the work. If there is no fair and objective evaluation system, there can be no fair and objective allocation of the awards.”

Tobias said he suspects OPM would attempt to create a new evaluation system for agencies to use to award raises or bonuses from the pool, but it would be imperfect at best.

“I don’t think OPM could come up with an effective system because agencies, and components within agencies, have different jobs, and those jobs have to be accurately described,” he said. “A difference between a 1, 2, 3, 4 and 5 has to be accurately stated.”

Ultimately, halting across-the-board pay increases in favor of only giving raises to high performers creates a civil service system where “all pay is at risk,” Tobias said. While such a compensation system could work in some areas of the private sector, he said it is not well suited to government.

“I think a system where all pay is at risk works when, say, you’re selling subscriptions to Government Executive,” he said. “But I don’t think it works in a knowledge-based public sector environment where the essence of success is engagement and collaboration, not individual performance.”