The Reagan administration, saying it is time to make "job performance the center of the federal personnel system," yesterday proposed to abolish automatic "in-step" pay increases for an estimated 1.4 million mid- and low-level federal workers.

The proposal would do away with in-grade increases that most federal workers get automatically as long as their work is acceptable. Instead, the employes would be required to meet tougher job performance standards to qualify for increases.

The administration also proposed a major change in personnel rules that would devalue seniority and give job performance more weight in federal layoffs, according to Donald J. Devine, director of the Office of Personnel Management, who announced the proposed changes at a news conference yesterday.

In addition, the administration proposed reducing the number of federal employes eligible for overtime pay, and announced it would issue a "clarification of management rights," which in effect would give the OPM the power to define what is an "appropriate" bargaining issue for federal employe unions.

Since October, 1981, employes with management responsibilities (GS13 to GS15) have been under a "performance pay" system. The administration's proposal would expand that system to all federal employes.

Now, employes automatically receive in-step increases if they receive an "acceptable level of competence" rating from their supervisors. Under the new system, employes in steps one through seven would have to obtain a "fully successful" rating, one level higher, to qualify for an increase.

Employes above step seven would have to obtain ratings of "exceeds fully successful" or "outstanding," the top two ratings, to qualify for an increase. Devine said 99 percent of federal employes eligible for step increases now receive them, but only 93 percent receive "fully successful" ratings.

The proposed changes are scheduled to be published in today's Federal Register and could take effect after a 60-day comment period.

The proposals would change layoff rules by allowing agencies to target employes with the poorest job ratings as the first to go. They also would lower the cutoff limit for overtime from its current $429 per week rate (GS10) to $318 per week (GS7). Devine said that is still more generous than the private sector overtime cutoff of $250 per week.

The changes announced yesterday are almost identical to those Devine proposed in January to the White House in an internal memo that drew immediate criticism from employe unions and several members of Congress when it was leaked to the press.

Anticipating renewed criticism yesterday, Devine described the proposed changes as part of the Civil Service Reform Act of 1978 passed by the Carter administration, and said federal workers had "nothing to fear."

He claimed that women and minorities would be helped by the proposed changes in layoff rules, and he discounted suggestions that the proposals would make it easier for political appointees to manipulate the Civil Service process.

Despite Devine's comments, a spokesman for the American Federation of Government Employes, the nation's largest federal employe union, yesterday called the proposals "another attempt by the administration to destroy . . . the Civil Service system."

Federation spokesman Loretta Ucelli said the OPM may have violated the Civil Service Reform Act by not consulting labor unions before drafting the changes.