Possible Savings in Department of Defense Personnel Costs in Italy

FPCD-78-9: Published: Mar 1, 1978. Publicly Released: Mar 1, 1978.

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The Foreign Service Act provided that compensation for foreign national employees will be based on locally prevailing wage rates consistent with the public interest. Under an agreement with the Italian Government, the Department of Defense (DOD) directly employs Italian nationals, establishes pay and fringe benefits, and sets personnel policies with little involvement by the Italian Government.

Using a complicated system patterned closely after private industry, the Army, Navy, and Air Force incur payroll costs of about $36 million annually for their foreign national work force in Italy. Annual wage surveys help assure that DOD compensation is in line with prevailing local practice, and recent pay increases appear comparable to those granted in the private economy. However, significant savings appear possible if certain aspects of the wage setting process are changed, including hiring of more Americans.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Defense should: determine if the payroll costs savings of providing subsidized dining facilities at military installations in Italy would be offset by the facilities and administrative costs incurred, determine if the extra benefits under the Army and Air Force's health insurance program for Italian employees justify higher premium costs and whether these employees should be covered under the Navy's less expensive plan, and develop plans and proposals for restructuring the civilian work force in Italy in coming years as a large number of foreign national employees retire.

    Agency Affected:


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