The ups and downs of pay banding

Simply putting in the time may no longer pay off for federal workers. Under a new personnel system endorsed by the Bush administration, employees would have to prove their worth.

Pay banding, or pay for performance, changes the way salaries are calculated by shifting the chief ingredient for making such decisions from quantity to quality. The program, supporters say, would make the government more competitive with the private sector by giving managers the flexibility to offer financial perks.

Agencies have experimented with pay banding for years. Now, administrators want to take the program governmentwide, replacing the General Schedule salary system, which dates to the 1930s and created a pay scale entangled in red tape. Because the schedule's formula for pay progression primarily takes length of service into account, Office of Personnel Management officials say it is ill-equipped to reward top performers.

"It's been around so long that it's certainly in need of modernization," said Ron Sanders, OPM's associate director for strategic human resources policy. "What we need to be able to say to an increasingly competitive labor market is, 'You're going to be rewarded on merit.'"

Union representatives and other critics caution that although pay for performance sounds good in theory, the program is unproven in practice. They maintain that the schedule, with its 15 salary grades, works fine if administered correctly.

"The current system is at least known," said Colleen Kelley, president of the National Treasury Employees Union. "It's not perfect, but it's understood."

But the old program already appears to be on its way out. The President's Management Agenda emphasizes the link between performance and pay, and major efforts have been initiated to meet the goal by eliminating automatic, across-the-board salary increases.

In January, OPM officials swapped the Senior Executive Service's six-tier system for pay banding, changing how 6,000 high-level employees earn wages. Similar

programs are in the works at the Homeland Security and Defense departments. "You can be sure that all eyes will be on the [DOD] National Security Personnel System," said Rich D'Adamo, president of Workforce Solutions LLC, "which many envision as the precursor to governmentwide implementation."

Some workers' groups cite flaws that have the potential for abuse in added flexibility. At the Federal Deposit Insurance Corp. and the Securities and Exchange Commission, workers "would say that the systems do not provide any credible rhyme or reason for performance" measures, Kelley said. "Employees see them as picking and choosing."

They are not alone. In a February 2003 report, the Government Accountability Office noted that Federal Aviation Administration managers and workers were critical of a performance-based pay system, and nearly two-thirds of the employees interviewed described it as unfair.

"I'm not sure that [it] has been an unqualified success at any of the agencies that have implemented it," D'Adamo wrote in an e-mail, "but there are best practices that can be drawn from these experiences."

Lisagor is a freelance writer based in Chicago.