Serious Problems Need To Be Corrected Before Federal Merit Pay Goes Into Effect

FPCD-81-73: Published: Sep 11, 1981. Publicly Released: Sep 11, 1981.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO reviewed the Federal agencies' progress in implementing the performance appraisal and merit pay provisions of the Civil Service Reform Act.

GAO is concerned about the Federal agencies' readiness to make sound merit pay decisions. The decentralized, nonprescriptive approach of the Office of Personnel Management (OPM) is not providing the leadership that is needed to insure quality merit pay programs. Its nonprescriptive approach has resulted in guidelines to agencies that are not timely or definitive enough to insure that effective pay-for-performance systems will be developed. OPM has emphasized reviewing and approving agencies' performance appraisal and merit pay plans for compliance with the law, but not assessing the quality of these systems or assuring that they operate properly. In addition, many agencies are not pretesting their systems to identify and correct problems early. The review points out that problems with merit pay implementation could cause program failure unless immediate action is taken. GAO believes that merit pay implementation should be delayed until agencies are ready to make sound decisions based on performance and urges OPM to revise its formula to comply with the law.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should enact an appropriation restriction in a fiscal year 1982 appropriations act. This restriction would prohibit agencies from making merit payouts beginning in October 1981 if they have not pretested their entire performance appraisal and merit pay systems or complied with OPM guidelines.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should require all agencies to comply with OPM guidelines on defining levels of performance before a payout is made.

    Agency Affected: Office of Personnel Management

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should more clearly define which employees are to be included in the merit pay program.

    Agency Affected: Office of Personnel Management

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should require agencies to pretest their entire pay-for-performance systems, from standard-setting to appraisal and merit payouts, before making actual payouts.

    Agency Affected: Office of Personnel Management

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should petition the President to grant exclusions from the October 1981 merit pay deadline to those agencies that have not pretested their entire performance appraisal and merit pay systems and those agencies that do not comply with OPM guidelines.

    Agency Affected: Office of Personnel Management

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should certify, after reviewing an agency's pretest, that the agency does fairly and accurately link pay to performance.

    Agency Affected: Office of Personnel Management

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should require agencies to insure employee participation in developing performance standards that address the most important elements of the employee's job in both qualitative and quantitative terms.

    Agency Affected: Office of Personnel Management

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should insure that agencies use performance standards that have been agreed to by the supervisor and employee at the beginning of the appraisal period as the basis for performance evaluations as mandated by the Reform Act. He should require those managers responsible for reviewing performance appraisals to also review and approve performance standards early in the appraisal period.

    Agency Affected: Office of Personnel Management

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should require agencies to have performance standards in place a minimum of 120 days before making pay decisions based on those standards.

    Agency Affected: Office of Personnel Management

  9. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: On the basis of the OPM petition, the President should exclude from the October 1981 mandatory merit pay implementation date those agencies that have not pretested their entire performance appraisal and merit pay systems and those agencies whose systems do not comply with OPM guidelines and General Counsel opinion. This will enable OPM to require agencies to pretest their entire pay-for-performance systems before making actual merit payouts and to give agencies time to make their performance appraisal systems comply with OPM guidelines and the General Counsel opinion.

    Agency Affected: Executive Office of the President

  10. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should revise the merit pay computation formula to insure that payroll costs under merit pay do not exceed what would have been paid had the General Schedule pay system remained in place for merit pay employees.

    Agency Affected: Office of Personnel Management

  11. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should develop a l981 merit pay computation formula for those agencies that have already made payouts to adjust for the additional funds used in 1980.

    Agency Affected: Office of Personnel Management

  12. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of OPM should insure that merit pay funds attributable to employees at the $50,112.50 statutory pay ceiling are not used to reward employees below the ceiling.

    Agency Affected: Office of Personnel Management

 

Explore the full database of GAO's Open Recommendations »

Sep 1, 2016

Aug 19, 2016

Jun 8, 2016

Mar 24, 2016

Jan 11, 2016

Jun 16, 2015

Apr 16, 2015

Mar 9, 2015

Jan 30, 2015

Jan 6, 2015

Looking for more? Browse all our products here