A pay study just released by the Office of Personnel Management says most federal workers are overpaid and endorses a 5 percent pay cut next year followed by a salary freeze until a new method of comparing federal and private-sector pay is worked out.
OPM's compensation report, leaked to the media last week, has not been approved by the agency's top management. But it contains a number of recommendations that have been proposed before, most of which would require congressional approval.
The study says the pay cut that will be proposed in next month's federal budget is the way "to move government pay back toward market levels" and to help reduce the federal deficit. A less desirable alternative to cutting pay, it says, is "the separation of 125,000 employes in order to achieve a spending reduction of the same magnitude."
The OPM projects $13 billion in payroll savings as a result of the pay cut and a three-year pay freeze. But the Office of Management and Budget, which actually makes up the federal budget, says there is no plan for an extended freeze.
Officials say the heart of the report is a new emphasis on linking federal pay to job turnover. The federal "quit rate," it says, is 3.8 percent, compared to 12 percent voluntary turnover in the private sector. "These government quit rates are very low for just one reason: overall compensation is too high," the report says.
The study recommends federal pay be lowered "to reduce the government's unfair competitive advantage over the private sector." A higher "quit rate" in government, it concludes, "would also have the advantage of bringing more fresh talent into government, especially at the higher grade levels. Using a "quit-rate" analysis, pay and/or other forms of compensation in the government should be frozen or actually reduced until its "quit rates" become similar to those in the private sector."
Other recommendations from the report to Director Donald J. Devine include:
* Overhauling the present pay-setting system that links federal pay to salaries in the private sector. The report says that system has "broken down" and that the last several presidents have not given the full pay raises recommended.
* Broadening the annual private-sector pay survey to include more smaller firms, and the 13 million state and local government workers whose pay is not now used for comparison purposes. OPM says the pay survey, conducted by the Bureau of Labor Statistics, excludes compensation paid to more than 60 percent of the nonfederal work force.
* Base future federal pay raises on the recruiting needs of the government. Raises would go only to employes in areas -- or occupations -- where the government was having trouble competing with industry.
* Allow the government to set special pay rates -- of up to 60 percent above the regular schedule -- for hard-to-fill jobs.
* Give the full raise recommended each year (based on expanded salary surveys) only to workers in jobs or places where the "quit rate" was between 7 and 12 percent.Give only one-half the pay raise recommended by the survey to employes in jobs or locales where the "quit rate" was between 3 and 6 percent, and no raises for workers in areas or occupations with a quit rate below 3 percent.
* Adopt a new job/pay classification system giving government the flexibility to deal with "the large percent of federal jobs that are overgraded." The OPM report said the problem of overgrading, i.e., paying more than a job is worth, is especially serious in the Washington area.