Locality pay remains stable and GS system is still broken, says pay agent

The out-going Trump administration took one last plea to Congress that the current compensation system under the General Schedule is broken and should be significantly revised.

In the President’s Pay Agent’s annual report to Congress released Dec. 17, the three presidentially appointed leaders emphasized the same concerns about the shortcomings of the GS system that many before them have and called on lawmakers to make significant changes.

“The existing GS classification and pay system rewards longevity over performance and fails to appropriately compensate employees based on mission needs and labor market dynamics. In recognition of this problem, the President’s Budget for Fiscal Year 2021 proposes realigning incentives by enhancing performance-based pay and slowing the frequency of tenure-based step increases. However, the administration cannot achieve sufficient reforms without Congressional action,” wrote Russ Vought, the director of the Office of Management and Budget; Michael Rigas, the acting director of the Office of Personnel Management; and Eugene Scalia, the Labor Department secretary. “Ultimately, we believe there is a need for fundamental legislative reforms of the federal compensation system. We believe it is imperative to develop performance-sensitive compensation systems that make the government more citizen-centered, results-oriented and market-based. We need to empower federal agencies to better manage, develop, and reward employees in order to better serve the American people.”

So far, lawmakers have been reluctant to propose any real changes to the GS system that dates back to 1949 despite consistent pleas to update the federal approach to determining pay.

The need to update the GS system is not a new issue by any means. In 2014, the Partnership for Public Service and Booz Allen Hamilton called for essentially throwing out the 65-year-old General Schedule system, comprised of 15 separate grade levels, and replacing it with five broad work levels “that more closely align with the knowledge work that most federal employees currently perform.”

That same year, the Government Accountability Office and lawmakers also pushed OPM to update the GS system, but offered little ideas. The Obama administration wanted to create a commission on GS reform, but little to nothing came from that idea.

Disagreement over 3 possible additions

Until Congress decides to revise the GS system, the Federal Salary Council will continue to build on the current approach to compensation. For 2021, the council confirmed its recommendation from earlier this year that there would be no new locality pay areas.

The council disagreed over whether to include Wayne County, Pennsylvania, Olmsted County and Pine County, Minnesota as new locality areas. The council asked the pay agent to waive the requirement that areas had a certain number of federal employees to qualify for locality pay, but the pay agent declined.

“While we understand the point that an area’s GS employment could be below the GS employment threshold due to vacancies and that such may be the case with respect to Wayne County, Pa., we do not know how many similarly situated locations there may be, or if agencies actually intend to fill vacant positions,” the pay agent stated. “It has been the practice in the locality pay program to apply criteria consistently for all locations in the country. We therefore ask that the council revisit its recommendation through further analysis of the potential impact of including vacant positions in addition to encumbered positions to meet the established GS employment threshold.”

The GS employment criterion has been in place since 1994 and despite recommendations over the years to change or eliminate that requirement, it remains in place.

“While the council under the previous administration recommended for several years that the criterion be eliminated, the GS employment criterion is useful in that it identifies whether there is a major federal employer in a location under consideration to become an area of application, which in turn may indicate that the location has a substantial employment base sufficient to draw significant numbers of candidates for employment who reside in the adjacent locality pay area,” the pay agent said. “In the past, the pay agent has suggested that the council consider recommending other criteria that could be used if the GS employment criterion were to be eliminated or reduced.”

Waiting on pay EO

The council also voted in October that there would be no new locality pay areas in 2022.

In fact, the councils’ recommendation to add Des Moines, Iowa as the one new locality pay area and expanding the Los Angeles, California area in 2020 just came became final in October and with the uncertainty about the 2021 pay raise, the increases may not happen for some time.

The omnibus spending bill the Senate passed on Dec. 22 and the House on Dec. 21 does include a 1% pay increase for federal employees in 2021

President Donald Trump, however, must physically set locality pay rates and implement the 1% raise via an executive order, which usually arrives near the end of the year.

In the 2020 report, the federal pay agent responded to the council’s six recommendations.

For instance, the pay agent agrees with the council that they should use commuting patterns data collected by the Census Bureau between 2011 and 2015 as part of the American Community Survey to change the boundaries of locality pay areas, but those changes must be subject to appropriate rulemaking.

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