Problems in Developing and Implementing a Total Compensation Plan for Federal Employees

FPCD-81-12: Published: Dec 5, 1980. Publicly Released: Dec 15, 1980.

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Legislation has been introduced which would give the President authority to adjust the rates of pay, benefits other than retirement, or both in order to achieve total compensation comparability between Federal employees and employees in the private sector. GAO and others have recommended that both pay and benefits be compared so that Federal total compensation can be equated to private sector total compensation. Currently, pay for Federal employees is based on pay in the private sector but does not take into account benefits such as retirement, insurance, and paid time off. The Office of Personnel Management (OPM) is testing a method to achieve total compensation comparability. GAO reviewed the proposed legislation and the OPM policies and techniques for measuring benefits and what impact they could have on the final comparability results.

While GAO believes that a total comparability policy should be adopted, features of the OPM approach need to be modified or substantiated before an accurate total comparability system can be achieved. Not only are there many benefits to be measured, but the more important ones, such as retirement and insurance, are contingent on future events. Under the OPM total comparability approach, only a nationwide measurement of benefits will be obtained. As part of the legislation, the Administration also proposes to base salaries of General Schedule employees below grade 15 on local rather than national rates; blue-collar wages are already based on local rates. Since indications are that private sector benefits can vary significantly from area to area, the use of local rates of pay with national benefit measures in a total comparability analysis and adjustment could introduce additional inequities into Federal compensation. The Administration believes that, unless the proposed changes are made to the Federal compensation-setting system, comparability for Federal employees may no longer be feasible. GAO believes that, because of the complexities involved in developing a total comparability system, an evolutionary approach which can be modified and refined over time should be considered. It supports the thrust of the legislation, but believes a number of improvements and alternatives should be considered.

Matters for Congressional Consideration

  1. Status:

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

    Matter: Congress should insure that OPM analyze locality benefits and, if they vary materially by locality, require OPM to take local benefits into account in any locality compensation adjustment.

  2. Status:

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

    Matter: Congress should require OPM to provide (1) detailed information and justification for the major assumptions used in its benefit measurements, including the cost implications of these assumptions; (2) assurance that benefit provisions can be gathered and accurately classified; and (3) some method for insuring that benefit differences by employee type are considered in its total compensation comparability analysis.

  3. Status:

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

    Matter: Congress should amend the legislative proposal to require OPM to assess the extent of secondary benefits and if feasible, develop appropriate measures of these benefits so they may be included in any assessment of total compensation comparability between the Federal and non-Federal sectors. Until these measures are developed, OPM should utilize available published data.


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