Proposal To Lower the Federal Compensation Comparability Standard Has Not Been Substantiated

GAO was asked to analyze the President's pay reform proposal to: (1) revise the comparability standard to allow for adjusting both pay and benefits to achieve total compensation comparability between Federal and non-Federal employees performing the same levels of work; (2) set Federal compensation levels at 94 percent of non-Federal levels; (3) permit the inclusion of State and local governments in compensation surveys; and (4) allow for locality pay for some Federal white-collar employees. GAO was specifically asked to analyze the proposal to set Federal compensation rates at 94 percent of what non-Federal employers provide in pay and benefits for the same levels of work.

The Administration included the 94-percent standard to recognize attractive features of Federal employment such as job security, job mobility, and portability of benefits, which are not currently considered in the Federal pay-setting process. Office of Management and Budget officials have stated that adequate data are not available for some of these features and some data cannot be obtained on a timely basis. Therefore, the Administration has proposed setting the value of these features at 6 percent of total compensation, thereby lowering the Federal compensation standard to 94 percent of non-Federal compensation. GAO disagrees with the proposed method for adjusting Federal compensation. Federal compensation should not be adjusted without first substantiating that differences exist between the Federal and non-Federal sectors and then determining the value of each of these differences. GAO does not believe that the Administration has adequately demonstrated that the change in the Federal compensation standard is justified. Furthermore, the Administration has not considered the approximately 6-month timelag that exists between the annual pay survey reference date and the effective date of the Federal pay adjustment which has maintained Federal compensation comparability at less than 100 percent. Implementing the 94-percent standard without making an adjustment for the timelag could result in Federal employees receiving much less than their non-Federal counterparts.