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.

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