Federal Merit Pay:

Important Concerns Need Attention

FPCD-81-9: Published: Mar 3, 1981. Publicly Released: Mar 3, 1981.

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The progress made by the federal government in implementing merit pay under the Federal Merit Pay Program was discussed. A review was initiated to determine if agencies will be adequately prepared to make merit pay determinations by October 1981.

Many federal agencies may not be prepared by the October deadline to make determinations concerning merit pay as set out in the Civil Service Reform Act of 1978. Most federal officials have not had any previous merit pay experience, and agencies have not developed methods to measure how much it is costing to implement merit pay or whether merit pay will improve agency performance. If these problems are not considered, the Federal Merit Pay Program will be no more successful than previous attempts to base pay on performance. Various non-federal agencies were observed to determine the best course of action concerning the implementation procedures needed for this program. It was found that agencies either had previous experience with merit pay systems or spent several years pretesting their systems before actually implementing them. Many federal agencies do not plan to pretest their systems, and those who do plan to pretest intend only to pretest for a few months. Also, many agencies will not have sufficient time to conduct thorough training sessions. Federal managers must also become committed to the effort needed to make the merit pay system work smoothly.

Recommendations for Executive Action

  1. Status: Closed

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

    Recommendation: The Director of the Office of Personnel Management (OPM) should take a stronger role in encouraging agencies to develop additional training courses and other programs designed to increase managerial skills and gain employee acceptance of pay-for-performance systems.

    Agency Affected: Office of Personnel Management

  2. Status: Closed

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

    Recommendation: The Director, OPM, should: (1) require federal agencies to define the objectives of their merit pay plans in more specific terms and develop evaluation strategies, using these objectives, to monitor operations of the merit pay plans; and (2) provide more detailed cost information to Congress on the implementation of the merit pay program. To do this, OPM will have to provide agencies with a comprehensive list of items for determining the cost of implementing merit pay and issue more detailed guidance on coverage so that agency heads and employee associations will have a more clear-cut idea of those employees that should or should not be covered by merit pay.

    Agency Affected: Office of Personnel Management

  3. Status: Closed

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

    Recommendation: The Director, OPM, should establish minimum pretest criteria which agencies must successfully meet before making initial merit pay determinations. Extensions should be afforded to those agencies unable to complete pretesting activities successfully by October 1981.

    Agency Affected: Office of Personnel Management

 

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