Problems in Developing and Implementing a Total Compensation Plan for Federal Employees

Legislation has been introduced which would give the President authority to adjust the rates of pay, benefits other than retirement, or both in order to achieve total compensation comparability between Federal employees and employees in the private sector. GAO and others have recommended that both pay and benefits be compared so that Federal total compensation can be equated to private sector total compensation. Currently, pay for Federal employees is based on pay in the private sector but does not take into account benefits such as retirement, insurance, and paid time off. The Office of Personnel Management (OPM) is testing a method to achieve total compensation comparability. GAO reviewed the proposed legislation and the OPM policies and techniques for measuring benefits and what impact they could have on the final comparability results.

While GAO believes that a total comparability policy should be adopted, features of the OPM approach need to be modified or substantiated before an accurate total comparability system can be achieved. Not only are there many benefits to be measured, but the more important ones, such as retirement and insurance, are contingent on future events. Under the OPM total comparability approach, only a nationwide measurement of benefits will be obtained. As part of the legislation, the Administration also proposes to base salaries of General Schedule employees below grade 15 on local rather than national rates; blue-collar wages are already based on local rates. Since indications are that private sector benefits can vary significantly from area to area, the use of local rates of pay with national benefit measures in a total comparability analysis and adjustment could introduce additional inequities into Federal compensation. The Administration believes that, unless the proposed changes are made to the Federal compensation-setting system, comparability for Federal employees may no longer be feasible. GAO believes that, because of the complexities involved in developing a total comparability system, an evolutionary approach which can be modified and refined over time should be considered. It supports the thrust of the legislation, but believes a number of improvements and alternatives should be considered.

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: No director on record Team: No team on record Phone: No phone on record