Human Capital:

Comparison of Federal and Private Sector Pay and Benefits

GGD-85-72: Published: Sep 4, 1985. Publicly Released: Sep 4, 1985.

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Pursuant to a congressional request, GAO provided current information on private sector and federal white-collar employee compensation packages. By law, federal employees' salaries are set at a level equitable and comparable with similar levels of work in the private sector, unless the President proposes alternative federal pay rates. There is no such requirement for benefits comparability. GAO analyzed several pay and benefits comparability studies conducted by private and federal organizations, but did not independently validate the data contained in the studies.

GAO noted that an independent study found that: (1) as of 1984, federal employees' total compensation averaged 7.2 percent less than that for private sector employees; and (2) in 1985, the difference increased to 9 percent or more because the federal pay increase for 1985 was limited to less than the average pay increase in the private sector. GAO found that: (1) frequent presidential use of alternative pay rates caused pay for federal employees to lag significantly behind that for private sector employees; (2) an 18.28 percent federal pay increase would be necessary to achieve federal pay comparability in 1985; (3) the federal retirement system is better than the average private sector system because it is worth more as a percentage of the average employee's pay, and federal retirement benefits are adjusted annually to offset consumer price increases; (4) private studies indicated that private sector employers generally pay a higher share of employee health insurance premiums than does the government; (5) private sector employee life insurance programs provide more basic coverage than the federal employee program, usually at no cost to the employee; (6) while federal employees generally receive one less holiday than private sector employees, this is offset by more generous federal annual leave benefits; and (7) federal sick leave lags behind the average private sector illness and disability income plan by 0.7 percent of pay.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Total compensation issues were discussed at the September 9, 1985, hearings on a new retirement system, but Congress took no action on this recommendation.

    Matter: In considering future changes and adjustments to elements of the federal compensation program, Congress may wish to make such decisions from the perspective of their effect on overall compensation levels. If such an approach is deemed appropriate, a mechanism for periodically measuring and assessing benefit program comparability will be necessary to complement the pay comparability process already required by law.

 

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