T he Government Accountability Office, which strives to serve as a model for federal agencies, moved last week to more closely link employee compensation to market conditions and job performance -- changes that effectively take the GAO out of the traditional federal pay system.

David M. Walker, the head of the GAO, informed employees of the changes Thursday and briefed reporters the next day. No employee will take a pay cut. Some top-notch performers will get higher pay, and some employees will see their salaries rise more slowly because a compensation study found they are being paid above market rates.

The change "will decouple us" from the annual across-the-board raise provided federal employees and allow the GAO to more directly link annual raises "to the skills, knowledge and relative performance of our employees than has historically been the case," Walker said.

Congress appears on track to provide federal employees with an average, across-the-board raise of 3.1 percent next year. Some federal employees will receive an additional raise averaging 1.5 percent, the "step increases" provided by the 15-grade General Schedule system.

Under the GAO system, Walker said, employees would receive a 2.6 percent across-the-board raise if they are meeting job expectations. In addition, they will be eligible for a raise based on their job performance, with the average performer receiving 2.15 percent and top performers getting more than that.

GAO employees who do not perform at an acceptable level will not receive a pay increase, Walker said. Although the GAO does not have many employees in that category, some ran afoul of the policy when it began last year. Walker said they have left the agency or improved their job performance.

The GAO, the congressional watchdog agency that probes the government on behalf of Congress, has been in the vanguard of recent government efforts to create more rigorous and credible pay-for-performance systems.

The departments of Homeland Security and Defense have announced plans to jettison the General Schedule system and replace it with performance-based systems that feature broader salary ranges, called "pay bands," and take into account market conditions. The giant departments are moving slowly to restructure their pay practices, in part because they do not have the systems in place to implement the changes and in part because federal unions have lodged objections and lawsuits.

The GAO is a part of the legislative branch, and Congress has given Walker permission to shake up the agency's compensation system. Walker said he is optimistic that others can follow in the GAO's footsteps.

"While the GAO approach is not the way, it is a way, and it is scaleable and transferable to executive branch agencies," he said.

Walker's plan received mixed reviews Friday from GAO employees, who are concerned about bonuses, pay caps and other issues. But several, who spoke on condition they not be identified, gave him high marks for listening to staff concerns and modifying parts of the plan as a result of feedback.

One part of the plan calls for splitting a pay band, called Band II, that is used to set the salaries for about 1,250 GAO analysts. Under the old Band II, analysts could be paid as much as $115,000.

The new plan calls for analysts with leadership responsibilities to be placed in Band II-B, where they can receive as much as $128,300. Analysts who do not routinely take on leadership roles will be placed in Band II-A, where they can make as much as $101,600.

The Band II split has raised some concerns among employees that a traditional GAO strength -- teamwork -- may suffer. Walker said the plan will provide a transitional period so analysts in II-A who receive performance pay may exceed the band's cap of $101,600.

During the next month, employees eligible for the higher-paying band will be asked to fill out applications, which will be evaluated by GAO managers. Walker and his senior aides will determine by year's end who should be in the higher-paying band, II-B.

The process, one GAO wag said, has created a standing joke inside the agency: "Two-B or not two-B."

Mansfield Fellows

Applications are being accepted for Mike Mansfield Fellowships for federal employees with a strong interest in the U.S.-Japan relationship.

Fellows work for a year in Japanese government offices as part of the two-year program.

For information, go to www.mansfieldfdn.org or contact Niharika Joe at 800-803-1106. The application deadline is April 3.

E-mail: barrs@washpost.com