To the Congress of the United States:
I am transmitting to the Congress today legislation to reform the Federal civilian employee compensation system. The proposals I am making will insure that Federal employees are rewarded fairly for their work and that taxpayers' dollars for such compensation are well spent. This legislation is part of my continuing efforts to make the operation of the Federal government more efficient, effective and equitable.
The Federal pay system has been governed under the principle of comparability since 1962. The comparability principle requires that annual Federal employee pay increases be based upon a survey comparison with pay levels of employees with similar jobs in the non-Federal sector. By determining pay raises through an objective, annual survey, the pay setting process is depoliticized, employee expectations are stabilized, and the government is better able to plan the timing and approximate size of pay adjustments. This comparability principle is equitable to Federal employees and taxpayers alike.
Despite the soundness of the principle of comparability, significant problems have developed in the way the comparability principle is implemented. The existing comparability system, by excluding consideration of such factors as employee fringe benefits, has distorted the comparisons between the Federal and non-Federal sectors. In addition, other structural and procedural problems have developed with parts of our Federal employee compensation system. The blue-collar pay system, for example, has statutory requirements that result in un justified salary levels for these workers.
The Federal Employees Compensation Reform Act of 1979 will remedy these problems. Its objectives are to:
—insure that Federal employees are paid fairly;
—make the comparability system more accurate;
—improve management flexibility in the compensation area so that needed employees can be better recruited and retained;
—make sure that taxpayers' money for Federal employee compensation is efficiently spent; and,
—eventually reduce the annual budgetary cost of the Federal payroll.
TOTAL COMPENSATION COMPARABILITY
At present, comparability between the the Federal and non-Federal sectors is measured only in terms of pay rates. However, a large part of compensation for both Federal and non-Federal employees consists of benefits aside from pay such as retirement and health plans. If we are to have a truly comparable Federal employee compensation system, such fringe benefits cannot be ignored. Under my proposal the value of benefits plus pay in the non-Federal sector would be compared with benefits plus pay in the Federal sector. This concept, known as total compensation comparability, would allow for a realistic assessment of whether the total compensation of Federal employees is ahead, comparable with, or behind that of their non-Federal counterparts.
A LOCALITY PAY SYSTEM FOR THE WHITE COLLAR WORK FORCE
At present, General Schedule employees of a given grade are paid the same rate regardless of where they work in the United States. However, pay rates in the non-Federal sector vary widely in different parts of our nation. As a result, Federal pay rates are significantly higher in some areas than local prevailing rates. In others, Federal rates are far below the local level. These differences either give the Federal .government an unfair competitive advantage over other employers or hamper the government's ability to recruit and retain a qualified work force. My proposal would minimize this problem by requiring that the compensation of most white collar employees be comparable with compensation in the local area.
CHANGES IN THE BLUE-COLLAR PAY SYSTEM
The system for paying blue-collar employees, known as the Federal Wage System, is already based upon the principle that Federal blue-collar pay rates should be comparable to prevailing local non-Federal rates. However, several features of the Federal Wage System law are inconsistent with this principle, such as one which requires the use of non-local wage data under certain circumstances and the distortion that results from applying average local pay rates to a designated step in the Federal grade structure. As a result, the Federal government pays many bluecollar workers well above local prevailing rates. My proposal would repeal these unjustified statutory provisions, and would allow the Office of Personnel Management to design provisions that reflect prevailing practices.
INCLUSION OF STATE AND LOCAL GOVERNMENTS IN COMPARABILITY SURVEYS
Under existing law, only private businesses are surveyed in the comparability process used to set Federal white and blue collar compensation rates. State and local government employment is excluded. This exclusion distorts true comparability. Today there are over 13 million State and local employees, almost 14 percent of the national work force. This is double the number employed in 1962 when comparability was first adopted. If compensation for Federal employees is to be truly comparable to what other Americans are paid, this large portion of the national work force should be included in the survey. In addition, there are a number of job categories in State and local government such as policeman, firefighter, and social worker which are analogous to certain Federal job categories but are not well represented in the private sector. This is a further reason why State and local government workers should be included in the comparability survey.
INCREASED MANAGEMENT FLEXIBILITY TO RECRUIT AND RETAIN A QUALITY WORK FORCE
This legislation would give Executive Branch managers needed flexibility to adopt more efficient and equitable industry pay practices. For example, premium pay such as overtime would be patterned after prevailing practices and the provisions of the Fair Labor Standards Act. Limited additional payments called "staffing differentials" would be authorized to aid in recruiting and retaining highly qualified individuals critically needed for the Federal work force. The Office of Personnel Management would be authorized to establish special pay and classification systems for those occupations that do not fit a standard pattern of the General Schedule and for which it is difficult to hire qualified employees. This would be similar to the authority the Office now has for special blue-collar schedules.
The reforms I am proposing today are based on the principle that comparability is the best long-term policy for determining compensation for Federal employees. It is not expected that any employee will suffer any actual reduction in current pay as a result of these proposals. However, in the long-run this legislation will create significant annual budget savings.
I ask the Congress to act promptly on these proposals to reform the Federal civilian compensation system. Federal employees will benefit from fairer compensation treatment. The American people will benefit from more efficient use of their tax dollars.
The White House,
June 6, 1979.