| Comment Number: | OL-10509282 |
| Received: | 3/15/2005 2:14:58 PM |
| Subject: | Notice of Proposed Rulemaking, Request for Comment |
| Title: | National Security Personnel System |
| CFR Citation: | 5 CFR Chapter XCIX and Part 9901 |
| No Attachments |
Comments:
A true Pay for Performance (PFP) system establishes the organizational value of each level of performance, from which the expected level of performance for a given salary can be determined. The NSPS FR establishes a pay increase for each level of performance. While this difference might appear minor on the surface, the long-term implications are enormous. For example, under a true PFP system like the Contribution-based Compensation Systems in use within DoD, two employees who contribute at the same level will eventually be paid the same amount. Annual pay adjustments are calculated to close the gap between each employee’s actual pay and target pay, so over time all employees are paid appropriately for what they are willing and able to contribute to the organization. We have modeled and analyzed a hypothetical NSPS system based on available information and the long-term results of such a system are less than desirable from our perspective. One study used an actual individual from a target-based pay system who consistently contributed well beyond the level of contribution for which he/she was being paid. We compared that employee’s actual salary vector from 1999 through 2003 with what he or she would have earned under the NSPS system, assuming maximum performance scores of 5 each year and 8 shares per year with an average share value of .8%. Our conclusion is that the NSPS system will not permit the wide range of salary adjustment options available under a pay system that includes a pay target. By directly relating pay to expected contribution/performance, a target-based system can offer very large increases to significantly under-compensated employees while giving small or no increases to employees who are at or above the target pay for their levels of contribution. This feature has been one of the most important and successful in our demonstration project in that it allows our managers to attract and retain the “super stars” needed to rebuild our workforce In another study, we modeled two hypothetical employees in the same career group, pay band and pay pool, but with different starting salaries. We gave them the same performance scores and shares each year for six years and tracked their pay over time. The results show that instead of converging on a common salary for their equal performance (as would be the case in a target-based pay system), the salaries continually diverge. This dynamic has two potential long-term undesirable implications. First, newer high-performing employees become frustrated with their inability to catch up in terms of salary with long-term employees performing at the same level. The frustration could lead them to seek employment elsewhere at a time the DoD needs to attract and retain fresh talent. Second, higher paid employees who have “leveled off” in terms of performance continue to get the same percentage pay increases each year, which translates into ever-increasing dollar raises. The following recommendations would provide more flexibility in the proposed pay-for-performance system and if adopted, would enable managers to reward and recognize those truly deserving employees. 1. Provide pay pool managers the authority to assign the number of shares given to each employee and the ability to determine the distribution of Base pay and Incentive pay increases for individual employees. This authority would allow a pay pool manager to converge the salaries of equally performing but differently paid employees. 2. Provide pay pool managers the authority to set aside a percentage of the pay pool funds to be used at their discretion. This authority would provide pay pool managers additional flexibility to adjust pay increases based on special circumstances. 3. Provide pay pool managers the authority to establish an “appropriate pay” table for use in determining suitable pay increases.