President’s Pay Agent Releases Annual Report, New Locality Pay Area

The President’s Pay Agent has approved of a series of recommendations from the Federal Salary Council in a report released by the Office of Personnel Management (OPM) last month. Among these recommendations is the creation of a new locality pay area. The report also called upon Congress to reform the federal compensation process to be more reflective of how the total compensation federal employees receive compares to the private sector.

The Pay Agent report approved of the creation of a new locality pay area in Des Moines, Iowa and the addition of Imperial County, California to the Los Angeles locality pay area, based on Federal Salary Council recommendations.

The Federal Salary Council, an advisory board comprised of association, government, and labor leaders, also suggested revising the methodology for gathering pay data. This suggestion, unlike the locality pay areas, was not unanimous. The Pay Agent concurred with the suggested revision for the salary survey methodology.

“We greatly appreciate the recommendation from the Chairman and the other two expert members of the Council that, when the Federal government administers pay and benefits systems for its dedicated employees, total rewards rather than just base pay should be considered,” the Pay Agent explains.

Essentially, the Council Chairman and Pay Agent argue that various human capital indicators (HCIs) should be used alongside base pay to determine total compensation.

The Pay Agent cited additional backing for this method, “As noted in our November 2018 report, a Congressional Budget Office (CBO) report issued in April 2017 echoes the findings of many labor economists in identifying a significant overall compensation gap in favor of Federal employees relative to the private sector. CBO identified a 17 percent average compensation premium for Federal workers – with Federal employees receiving on average 47 percent higher benefits and 3 percent higher wages than counterparts in the private sector.”

The Council Chairman, agreeing members, and Pay Agent believe including factors, such as benefits, will allow for a more accurate comparison between federal and non-federal compensation gaps.

The Pay Agent was critical of the General Schedule classification system in general and urged Congressional action to create a better federal pay system.

“The existing GS classification and pay system rewards longevity over performance and fails to appropriately compensate employees based on mission needs and labor market dynamics. In recognition of that, the President’s Budget for Fiscal Year 2020 proposes realigning incentives by enhancing performance-based pay and slowing the frequency of tenure-based step increases. However, the Administration cannot achieve sufficient reforms without Congressional action,” the report states.
“Ultimately, we believe there is need for fundamental legislative reforms of the Federal compensation system. We believe it is imperative to develop performance-sensitive compensation systems that make the Government more citizen-centered, results-oriented, and market-based. We need to empower Federal agencies to better manage, develop, and reward employees in order to better serve the American people.”

The President’s Pay Agent is a board comprised of Labor Secretary Eugene Scalia, Office of Management and Budget Acting Director Russell Vought and OPM Director Dale Cabaniss.