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

Highlights

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

Recommendations

Matter for Congressional Consideration

Matter	Status	Comments
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.	Closed	Please call 202/512-6100 for additional information.

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Office of Personnel Management	The Director of OPM should require all agencies to comply with OPM guidelines on defining levels of performance before a payout is made.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	The Director of OPM should more clearly define which employees are to be included in the merit pay program.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	The Director of OPM should certify, after reviewing an agency's pretest, that the agency does fairly and accurately link pay to performance.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Executive Office of the President	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.
Office of Personnel Management	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.	Closed Please call 202/512-6100 for additional information.

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Topics

Human Capital

Civil serviceMerit compensationPerformance appraisalSalary increasesPay for performancePerformance measuresPayroll recordsAppraisalsFederal agenciesExpenditure of funds