Pay freeze could heat things up at the exits

By Joe Davidson
Washington Post Staff Writer
Thursday, December 16, 2010; 8:00 PM

Actions have consequences. One unintended consequence of the two-year pay freeze President Obama asked Congress to impose on federal workers is the impact it may have on higher income employees and those eligible to retire.

The freeze could be the push they need to say good-bye to Uncle Sam and take their talents elsewhere.

"There's already a lot of pay compression at the top of the pay scale," said Max Stier, president and chief executive of the Partnership for Public Service, a nonprofit organization that focuses on federal workforce issues. Their income level may sound good, he added, "but a lot of those people have alternatives that pay a lot more." (The Washington Post and the partnership have a content-sharing relationship.)

Even those who contend, often misleadingly, that federal employees are overpaid must admit that highly trained, highly skilled federal workers - the doctors, lawyers, scientists and others - could command much greater money in the private sector.

Another consequence of the freeze on some better paid civil servants could be an aversion to upward mobility. Employee association leaders warn that the pay freeze could discourage high-level General Schedule workers, those in grades GS14 and 15, from seeking senior-level positions.

"Yes, the freeze will discourage 15s," said Carol A. Bonosaro, president of the Senior Executives Association. "We know they're discouraged already from our survey of 14s and 15s. While they didn't choose pay as the top detractor (to seeking senior positions), one-third wrote comments which specifically mentioned pay."

The increased responsibility of senior-level employees and the less-stringent job protection available to them, coupled with the freeze could make it "not worth it," Bonosaro added.

Salaries for Senior Executive Service members are set within broad national ranges, with individual pay varying according to qualifications and performance, up to a cap that for most this year is $179,700.

There is confusion on how the freeze would apply to SES performance awards, according to one reader, who said some agency personnel offices are telling employees the freeze blocks SES performance awards, even for those below the cap. The Office of Management and Budget said "SES employees will continue to be eligible for lump-sum performance awards," but not those that increase base pay.

The affect of the freeze on federal executives is important because so many of them are near retirement age. "About 90 percent of federal executives will be eligible for retirement over the next 10 years, and the percentage of federal executives currently eligible for retirement has reached 50 percent of the corps in some agencies," according to a report by the Senior Executives Association and Avue Technologies. "Unresolved challenges in attracting the best and the brightest to these positions would leave a serious leadership vacuum at the top of the civil service."

The pay freeze certainly presents another challenge.

"It pretty much takes away any incentive" for GS15s to seek senior-level positions, said Tom Burger, executive director of the Professional Managers Association, whose members are largely Internal Revenue Service managers.

The freeze could encourage older federal workers to retire earlier than they had planned because of the way retirement payments are calculated. They are based on an employee's three highest paid years, generally the last three.

"In some cases your salary today will be your high salary and a two year freeze will make the average whatever the number is now," Burger said. "Seventy-five thousand dollars now, frozen for two more years, means the average is still $75,000."

Despite these misgivings, Moira K. Mack, an OMB spokeswoman, said the office is "confident that we'll continue to be able to retain and motivate the strong federal management group we need to drive performance and make government work more efficiently and effectively for the American people."

Contractors, too

Federal employees aren't the only people who do work for the federal government who could be affected by efforts to balance the nation's books. Federal contractors may be too.

At least that will be the recommendation when the National Commission on Fiscal Responsibility and Reform issues its full report. When the commission, led by co-chairmen Alan K. Simpson, former Republican senator from Wyoming, and Erskine Bowles, a Clinton administration White House chief of staff, issued what was called its final report earlier this month, in made no mention of cutting contractor expenses, as did an earlier draft document.

But that was misleading. It turns out the final report was not the complete report.

Explains commission spokesman Frederick J.Baldassaro: "The commission's final illustrative list of savings has yet to be published, but when it is, it will closely mirror the recommendations attached in the co-chairs' draft proposal released on November 10, which included options to reduce the size of the federal workforce and to cut the number of federal contractors."

The draft called for eliminating 250,000 non-defense contractors and 4 percent of defense-related contracting positions.

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