Federal Compensation Comparability

Most federal employees' pay is governed by the legislated principle of comparability with pay in the private sector. Nonfederal pay rates vary among geographic areas, types of industries, size of establishments, and occupations. Provisions of the federal pay-setting processes generally prevent the government from considering such variances. This results in overpayment or underpayment of federal employees in specific occupations or localities and affects the credibility of the concept of comparability.

The President plans to set a 5.5-percent cap on the 1978 comparability adjustment for federal white-collar employees, but pay increases could also be reduced by improving comparability processes. Changes have been made to the federal white-collar pay-setting process which have saved about $3.7 billion annually, but congressional action is needed to include state and local government employees in the pay surveys and to compare benefits and pay with private sector compensation. For federal white-collar employees under the general schedule, action is needed to: (1) establish salary schedules that are more in line with labor market characteristics; (2) eliminate cost-of-living allowances paid to employees in nonforeign areas; (3) develop a method to reduce or compensate for the 6-month time lag between the reference date of comparability data and the date of the pay adjustment; and (4) develop a method for granting within-grade salary increases based on merit. For federal blue-collar employees under the federal wage system, action is needed to revise the five-step system for nonsupervisory grades, wage rates based on private sector rates paid in another wage area, and night-shift differentials. Action is also needed to establish a new salary system for top federal executives.