A plan to restructure the federal pay system by linking government workers' pay to local private-sector wages was approved by a congressional conference yesterday.

The federal pay bill calls for closing the gap between private-sector wages and the salaries of white-collar federal workers beginning in 1994 and guaranteeing employees an annual raise of up to 5 percent in 1992, 1993 and 1994.

The deal, the result of a year of bipartisan work in the congressional civil service committees and by Constance B. Newman, director of the Office of Personnel Management, is expected to help the federal government in recruiting and retaining qualified employees.

"Today's congressional action is good for the employer, the federal workforce and the taxpayer," said Newman. "It took immense hard work and cooperation by many people to attain today's action."

The administration has pledged $3.6 billion over five years to help close the gap. Half of that amount is an increase in the annual federal payroll, which is about $63 billion, and the other half is supposed to come from department and agency budgets, which are expected to save money through reduced turnover and more selective targeting of raises. No money has been earmarked beyond the five years, leaving Congress to appropriate the amount it needs to reach the goals outlined in the conference report.

The General Schedule, the current civil service pay scale, does not take into account the difference in real purchasing power between employees who live in high-cost cities, where federal salaries generally do not go far, and employees who live in inexpensive regions, where the same salary is ample in comparison to the local prevailing wages.

The president's pay advisers this year said federal employee salaries had fallen an average 30 percent behind private-sector wages.

Under the plan, in 1992 and 1993 employees are guaranteed an annual raise equal to the government's Economic Cost Index, up to 5 percent. In 1994, they will receive an increase based on the ECI minus .5 percent, up to 5 percent.

Beginning in 1994, workers in high-cost areas would receive extra wages to close the gap. In 1994, 20 percent of the gap would be closed. In each year after that for the next nine years, employees would receive an extra raise equal to 10 percent of the remaining private-public gap.

The president also has the authority to immediately grant an 8 percent pay raise to employees in the most expensive cities where there are serious and widespread recruitment problems.

The bill also includes a provision, sponsored by Sen. Dennis DeConcini (D-Ariz.), that increases the pay of 56,000 federal law enforcement agents who are GS-3 through GS-10 by $1,000 to $4,000, split over two years. In addition, it gives agents in eight regions, including the Washington area, locality-based increases ranging from 4 to 16 percent beginning in 1992.

The pay bill from the Treasury, Postal Service and General Government Appropriations conference must be approved by the House and the Senate and signed by the president.

While House and Senate conferees debated the pay package yesterday afternoon, Robert Tobias, president of the National Treasury Employees Union, and 19 other federal employees who belong to the union were arrested in front of the White House for picketing without a permit.

At a rally beforehand, Tobias said federal workers, threatened with furloughs because of the budget impasse, "have had their livelihood and jobs put in jeopardy by President Bush's policy to protect rich people and there comes a time when people have to draw the line."