Council offers up 5 recommendations to change the way federal pay is measured

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The Federal Salary Council will submit a series of recommendations to Trump administration leaders that describe how government might begin to change the way it makes key decisions about employee pay.

After several months of debate, the council is advancing five options that it wants the president’s pay agent, a body comprised of the Labor secretary and directors of the Office of Personnel Management and Office of Management and Budget, to consider when comparing federal pay to the private sector.

Recommendations include:

  1. Continue to use the current methodology,
  2. Adopt a salary method that “reduces the extent of statistical modeling,”
  3. Continue to use the current methodology and use other human capital data on attrition and acceptance rates, for example, to make future salary-based decisions,
  4. Develop a method that compares both federal employee pay and benefits to those of the private sector, and,
  5. Find a way to conduct a comprehensive, periodic review of total compensation for federal civilian, white-collar employees. This review may be similar to the Defense Department’s Quadrennial Review of Military Compensation.

The first three options don’t require a change in current law, but the latter two would.

The decision wasn’t unanimous. Federal employee unions who sit on the council, including the American Federation of Government Employees, the National Treasury Employees Union and the National Federation of Federal Employees, do not agree with the alternatives and voiced their dissent at the Federal Salary Council’s Tuesday meeting.

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Still, the council will submit these recommendations to the president’s pay agent by the end of the calendar year.

“There is no requirement that the salary council speak as one, nor is there any statutory requirement that majority rule,” the council’s chairman, Ron Sanders, told reporters after the meeting.

The council’s submission will also include the dissenting views from federal employee groups, which questioned whether the committee even had the statutory authority to make such recommendations.

[The council] “is not meant to be a platform for the president’s own views as expressed by his appointee,” Jacque Simon, AFGE policy director, said Tuesday. “This year’s work group report, however, is a clear attempt to politicize what has been for the last 26 years a technical, apolitical report that has followed the law’s instructions regarding measurement of pay disparities and boundaries of pay localities.”

AFGE’s statement, of which NTEU and NFFE were also signatories, expressed concern that the council is using itself as a vehicle to advance the Trump administration’s stated preference for pay-for-performance over across-the-board pay increases.

The unions also adamantly defended the Bureau of Labor Statistics and the model it uses to measure discrepancies in pay between the public and private sectors. The current model shouldn’t go away, Simon said.

“We did not advocate for throwing anything out,” Jill Nelson, the council’s vice chair, said in response. “We were looking more at having more factors on the table. How they’re considered, that will all work its way out, but they are still elements. They should at least be there for consideration.”

Currently, the salary council applies this model, which uses the National Compensation Survey to measure non-federal compensation in a particular labor market and compare it to federal pay for GS employees who perform vaguely similar work in the same region.

According to BLS, private sector workers are paid, on average, 30.91 percent more than their counterparts in the federal government, nearly 1 percent less than the bureau’s pay disparity average during the previous year.

The pay disparity is down, BLS said, because the bureau uses a sample of pay establishments across the country each year to calculate the average. Pay establishments in the sample vary each year, which the bureau believes explains the most recent drop in pay disparity.

Federal unions argued that agencies have challenges in recruiting and retaining a talented workforce because Congress never sets aside enough to funding to pay employees up to the 30 percent gap, as the Federal Employee Compensation Act (FECA) instructs lawmakers to do.

“I would submit that one of the reasons that pay raises aren’t fully funded because of that 30 percent gap is because no one trusts that that gap is 30 percent,” Sanders said.

Locality pay, he added, isn’t the entire solution to agencies’ recruitment and retention challenges.

“We’re not hemorrhaging talent across the board,” Sanders said. “We are hemorrhaging talent in some occupations and in some grade levels and in some locations. If our job is to help the government recruit and retain talent, a single number, nationwide, doesn’t cut it.”

Other organizations have questioned this 30 percent figure that’s supposed to describe the pay gap between the federal and private sectors.

The Congressional Budget Office, for example, said federal employees are compensated at a rate that’s 17 percent higher than private sector workers. The Cato Institute put the gap in favor of the federal workforce even higher.

The Federal Salary Council decided back in April to begin a review of the specific formula it uses make decisions key decisions about the locality pay program.

A working group then met five times before Tuesday’s public meeting to discuss how it might make changes to the method government currently uses to compare federal pay with the private sector.

The president’s pay agent could choose, as the first option suggests, to do nothing and keep the current methodology. Or, the pay agent could choose any combination of the other recommendations.

“These options are points along a continuum,” Sanders said. “They’re not the only options. There’s a lot between here and there, and if the pay agent thinks some of the challenges that we’ve articulated are real, then maybe they should do their own study.”

New locality pay areas coming soon

Though the council does not agree about how it should measure and compare federal employee pay, it did agree on a few other important changes to the federal locality program.

The Federal Salary Council offered some reassurance to some 62,000 federal employees who have, in some cases, been waiting for several years to receive long-discussed changes to locality pay in their areas.

OPM said it is the agency’s intention to finalize Birmingham/Hoover/Talladega, Alabama; Burlington/South Burlington, Vermont; San Antonio/New Braunfels/Pearsall, Texas; and Virginia Beach/Norfolk, Virginia, as new locality pay areas in time for employees’ first paychecks in January 2019.

OPM has already issued regulations for these four locations, but the president has final say and must still physically set pay rates for these areas.

The agency has approved Des Moines, Iowa, as a separate locality pay area for 2020. It also recommended that Imperial County, California, be established as an “area of application” to the Los Angeles locality pay area.

The president’s pay agent must still approve these recommendations, and OPM must propose and finalize changes with new regulations.  Then, the president must approve them.