Federal Workforce:

Payroll and Human Capital Changes During Downsizing

GGD-99-57: Published: Aug 13, 1999. Publicly Released: Sep 13, 1999.

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Pursuant to a congressional request, GAO provided information on the factors causing the federal payroll to increase while the number of federal employees decreased during downsizing, focusing on the extent to which each major factor contributed to the increase in the federal payroll during fiscal years (FY) 1993 through 1997.

GAO noted that: (1) between the beginning of FY 1993 and the end of FY 1997, the total federal payroll grew by $8.7 billion to $102.4 billion, while the size of the federal workforce decreased from 2.2 million employees to 1.9 million; (2) in real terms, however, overall federal payroll costs decreased because, in 1997 constant dollars, the payroll declined by $2.4 billion during the 5-year downsizing period; (3) because the decrease in the number of employees for the most part offset actual aggregate payroll cost increases for those employees remaining on the payroll, GAO calculated payroll costs for a constant workforce of 1.9 million employees over the 5-year period to isolate the payroll cost increases and their causes; (4) on this basis, GAO estimated that, between FY 1993 and FY 1997, payroll costs in nominal dollars increased about $11,600 per employee and approximately $21.6 billion in total; (5) for comparison, in terms of 1997 constant dollars, this payroll increase was approximately $6,460 per employee and $12.0 billion for 1.9 million employees; (6) the increased payroll costs were attributable to several causes, but the predominant cause was the annual pay comparability adjustment that is intended to keep federal pay competitive with that of nonfederal employers; (7) the cost of employee benefits and changes in the characteristics of the federal workforce also played a major role in increasing the overall federal payroll cost; (8) employee benefits increased due primarily to: (a) incentives paid to separating employees; (b) the increasing proportion of employees in the Federal Employees' Retirement System (FERS) and the increasing cost of the government's required match for FERS employees' Thrift Savings Plan contributions; and (c) increases in health insurance costs; (9) changes in the characteristics of the federal workforce that increased payroll costs included: (a) career step increases based on tenure and satisfactory performance; (b) promotions; and (c) pay increases due to high quality performance; and (10) the payroll cost increases that resulted from these factors, however, were partially offset by the limited hiring of staff, at grades below the governmentwide average, whose lower pay levels helped dampen the overall average payroll and grade increases.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Section 1313 of the Homeland Security Act of 2002 (P.L. 107-296), requires that before agencies obligate any resources for voluntary separation incentives (buyouts) they prepare a plan that outlines how the payments will be used and what the end results will be.

    Matter: To ensure the most cost-effective use of any future buyouts and to help mitigate the adverse effects that can result from poorly planned downsizing, Congress should, in considering buyout legislation, continue to require agencies to prepare strategic buyout plans as a prerequisite for implementing buyout authority and to implement downsizing consistent with the results of their planning efforts.

  2. Status: Closed - Implemented

    Comments: Section 1311 of the Homeland Security Act of 2002 (PL 107-296), requires agencies to include strategic human capital planning in performance plans and reports. Such performance plans must be submitted to Congress. A critical component of agencies' strategic human capital planning is a description of methods needed, if any, to reshape the workforce, including use of buyouts. GAO believes this action by Congress to ensure that human capital planning is a part of agency planning and performance reporting meets the intent of its 1999 recommendation.

    Matter: Similar to what was done for buyouts authorized by P.L. 104-208, Congress should require agencies to submit their plans to appropriate congressional committees prior to implementing their buyout authority.


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