FEDERAL PAY CAP HITS GS EMPLOYEES HARD - October 9, 2008

Failure to adequately compensate feds within General Schedule pay system diminishes employee morale; threat to retention raises demands for reform

Alexandria, VA – The Federal Managers Association (FMA) deplores the failure of the federal pay and benefit structure to extend the approved 3.9 percent pay raise to all GS-15 employees. This pay cap raises concern that feds may retire prematurely, needlessly adding to the brain drain of the federal government.

On September 30, President Bush signed into law a $600 billion Continuing Resolution (CR), funding the government through the beginning of March 2009. The funding bill, P.L. 110-329, contains a provision granting federal employees a 3.9 percent pay raise for 2009. An increasing number of federal employees enrolled in the General Schedule (GS) pay system, however, are finding out that they will not receive the pay raise due to the expansion of limits on the total salary they are able to receive.

By law, a GS employee’s base pay and locality pay may not exceed Level IV of the Executive Schedule pay system. In 2008, that meant that employees with a grade of GS-15, the highest position in the GS system, could earn a maximum of $149,000. Since employees in the Executive Schedule in 2008 received a pay increase of 2.5 percent, GS employees earning the highest salaries could only receive a pay increase that would match their maximum salaries with the Executive Schedule. For 7,100 feds in 2008, this meant receiving a pay increase below 3.9 percent.

According to a Congressional Research Service (CRS) report released in February, and recently updated, the number of GS employees affected by the current pay cap is expected to increase drastically in the upcoming years, potentially expanding to include those in the GS-14 ranks by 2012. Potentially, the report states, many GS-14 employees, seeing that a promotion to GS-15 levels will not lead to a true pay increase, may abstain from accepting the increased responsibilities associated with the higher grade. GS employees may also be inclined to retire earlier, as the inability to increase their salaries (the highest three of which are used to calculate retirement annuities) at a rate comparable to lower-graded employees reduces the incentive to remain in the workforce.

Darryl Perkinson, FMA National President noted, “This unfortunate and unfair situation has the potential to deeply impact the federal government’s ability to function and could lead to higher costs to taxpayers due to unnecessary inefficiencies. This system must be reformed so that we no longer punish our high-level managers. We must do what we can to retain these employees who possess needed experience and knowledge.”