Reduction in Force Can Sometimes Be More Costly to Agencies Than Attrition and Furlough

GAO documented an analysis of the savings and costs of reductions-in-force (RIF) at eight agencies and provided a methodology for other agencies to use to compare the potential fiscal impacts of RIF and attrition when there is a need to reduce staff. Included are assessments of the extensiveness of downgrading resulting from RIF and a detailed analysis of the effects of RIF on the employment status of women and minorities.

GAO found that each RIF examined had a distinctive pattern of savings and costs, downgrading, and consequences for women and minorities; therefore, each prediction would be specific to the agency considering RIF. When budgetary and indirect costs are considered, many RIF were not cost-effective for the agencies when compared to attrition, and net savings were sometimes small enough to make furloughs a reasonable alternative. There were also some positive effects on the civil service retirement system because of the substantial loss of future paid benefits to separated employees; however, early retirements increased costs initially. GAO found that the cost of downgrading employees was one of the highest costs in all RIF since there was a high incidence of post-RIF promotion; therefore, RIF may lead to substantial disruption to agencies as downgraded employees are promoted and others voluntarily leave. Examinations of RIF separations showed large disparities between women and men and between minorities and nonminorities and was higher than if they had left voluntarily. GAO believes that thoroughly examining the comparable savings and costs for attrition and furloughs prior to RIF would provide a stronger basis for choosing alternatives when staffing or budgetary reductions are required.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Lois-Ellin Datta Team: General Accounting Office: Program Evaluation and Methodology Division Phone: (202) 275-1652