# Presentation: 424218

## Primer on the General Schedule Pay Structure

- SPEAKERS
- Melissa Brehe, OPM
- Allan Hearne, OPM
- Jerry Mikowicz, OPM

## Who Does the General Schedule Represent?

- Department of
- Housing and
- Urban
- Development

**General Services**
**Administration**

- Department of
- Energy

- Department of
- Labor

**National Aeronautics**
**and Space**
**Administration**

- Department of
- Commerce

- Department of
- Health

- Department of
- the Interior

- Social Security
- Administration

- Department of
- the Navy

- Department of
- the Air Force

- Department of
- Defense

- Department of
- Justice

- Department of
- the Army

- Department of
- the Treasury

- Department of
- Veterans Affairs

- Department of
- Agriculture

- Department of
- Energy

- Department of
- State

- ...and many more

**Notes:**
Covers 1.3 million out of 1.6 million executive branch white-collar employees
Covers all agencies under title 5 except for those agencies/occupations that have received exemptions

## What Does the General Schedule Look Like?2000 General Schedule Pay Rates(Excluding Locality Pay Rates)

**Notes:**
And here it is

## Major Features of theGS Pay System (1)

- Pay Linked to Classification and Contributions
- equal pay for substantially equal work
- variations in rates of pay based on
- difficulty, responsibility, and qualification requirements of the work
- contributions of employees to efficiency and economy in the service
- [Classification Policy (5 U.S.C. 5101)]
- appropriate incentives and recognition for excellence in performance
- [Merit System Principles (5 U.S.C. 2301(b)(3))]

## Single white-collar system covering most employees
Separate blue-collar system
Separate senior management/senior level system
Special systems, special rates 

Single job-grading system
15 grades (formerly 18 grades)
Some agencies outside of the General Schedule have more or less than 15 grades [example: the Foreign Service, another statutory pay system, has 9 classes (grades)]

- Separate blue-collar system
- Separate senior management/senior level system
- Special systems, special rates
- Single job-grading system
- 15 grades (formerly 18 grades)
- Some agencies outside of the General Schedule have more or less than 15 grades [example: the Foreign Service, another statutory pay system, has 9 classes (grades)]

- Major Features of theGS Pay System (2)

**Notes:**
GS-16 through GS-18 eliminated by FEPCA
Other pay plans include those for VA, the Foreign Service, FAA, demonstration systems, blue collar, FIREA agencies, TVA, DOD contracting, etc, and high level such as the Executive Schedule, SES, senior level, scientific and technical, ALJ’s, etc.

## Single pay plan
The General Schedule pay plan code is “GS;” other structures may look like GS (e.g. GG), but differences exist.
GS covers about 70 percent of the executive branch
There are about 160 pay plans in the executive branch

- The General Schedule pay plan code is “GS;” other structures may look like GS (e.g. GG), but differences exist.
- GS covers about 70 percent of the executive branch
- There are about 160 pay plans in the executive branch

- Major Features of theGS Pay System (3)

## What Does the General Schedule Accomplish? 

- Allows Government to deal systematically and fairly with:
- 	A.  Internal Equity
- 	B.  External Competitiveness
- 	C.  Individual Pay Progression

**Notes:**
While the FES has been around since the mid-70’s, some occupations are still covered by the whole-job narrative standards

## How Does a Formal Grade Structure Link to Pay? (1)

- The Classification System facilitates all other aspects of personnel management
- The classification structure is fixed
- Pay is variable

**Notes:**
While an entry-level engineer is equal to a mid level clerical worker at first, their career progression patterns are vastly different

A single pay system keeps agencies from competing with each other --FAA vs Air Force air traffic controllers

## How Does a Formal Grade Structure Link to Pay? (2)

## General Schedule Pay Structure

- 15 grades (definitions in 5 U.S.C 5104)
- 10 steps per grade
- 30 percent pay range per grade and overlapping pay ranges
- Inter-grade differential
- Job intervals for one-grade series
- Job intervals for two-grade series
- Declining percentage grade differentials
- Shape of pay structure
- Exponential curve

## One-Grade 
 Inter-Grade Differential 

   From	  To
(Midpoint)       (Midpoint)		Percent
   GS-1	GS-2	12.4%
   GS-2	GS-3	  9.1%
   GS-3	GS-4	12.3%
   GS-4 	GS-5	11.9%
   GS-5	GS-6	11.5%
   GS-6	GS-7	11.1%
   GS-7	GS-8	10.8%
   GS-8	GS-9	10.5%
   GS-9	GS-10	10.1%
   GS-10	GS-11	  9.9%

- One-Grade
-  Inter-Grade Differential
-    From	  To
- (Midpoint)       (Midpoint)		Percent
-    GS-1	GS-2	12.4%
-    GS-2	GS-3	  9.1%
-    GS-3	GS-4	12.3%
-    GS-4 	GS-5	11.9%
-    GS-5	GS-6	11.5%
-    GS-6	GS-7	11.1%
-    GS-7	GS-8	10.8%
-    GS-8	GS-9	10.5%
-    GS-9	GS-10	10.1%
-    GS-10	GS-11	  9.9%

- Grades:  One-Grade Interval Work

## Grades:  Two-Grade Interval Work

- Two-Grade
- Inter-Grade Differential
-    From	  To
- (Midpoint)       (Midpoint)	Percent
-    GS-5	GS-7	23.9%
-    GS-7	GS-9	22.3%
-    GS-9	GS-11	21.0%
-    GS-11	GS-12	19.9%
-    GS-12	GS-13	18.9%
-    GS-13	GS-14	18.2%
-    GS-14	GS-15	17.6%

## Grades:  Example of Career Ladder Pay Progression GS-5 to GS-11 Professional versus Full Performance GS-5 Clerical

- Date of Hire

**Notes:**
An entry-level professional employee is “equal” to a mid-level clerical when first brought on-boar.  However, career progression and future earnings potential are vastly different.

## Pay Range Theory and Practice

- Range spreads usually vary based on the level and sophistication of skills required for a position.  Entry-level positions that require skills that are quickly mastered usually have narrower pay ranges than supervisory, managerial, or high-level technical positions.
- Individuals in lower-level positions not only master the requirements of the job sooner, they also have a greater number of opportunities over time to be promoted to higher-level positions.  Senior-level positions require a longer learning curve and often have limited opportunities for advancement.  *(WorldatWork)*

**Notes:**
This is what the private sector experts say

## Pay Ranges versus Pay Grades

- Narrow pay ranges and more grades allow for more frequent promotions-and a greater perception of growth and advancement-than wider ranges and fewer grades.  *(WorldatWork)*

**Notes:**
Here’s an example

## Federal Pay Range Patterns

- _Pay System_
- Federal Wage System
- General Schedule
- Foreign Service
- Demonstration Project- China Lake
- Senior Executive Service

- _Range Spread_
- 16.7 percent
- 30 percent
- 47 percent
- Band III
- 55%
- No Range
- Rank-in-Person

- _Characteristics_
- Nonexempt Production
- and Maintenance
- Professional, Administrative
- Technical, Clerical, and Officer
- Officers and Support Personnel
- Scientific and Engineering and Senior Professional Staff
- Executive Level Management

**Notes:**
This is what we do

## Private Sector Pay Range Patterns

*(WorldatWork)*

## Federal Pay Range Spread (1)

- General Schedule Steps
- Uniform dollar amount
- Calculated as 3.33 percent of the step 1 rate
- Declining percentage

- Step 1
- plus 3.3 percent = Step 2
- plus 3.2 percent = Step 3
- plus 3.1 percent = Step 4
- plus 3.0 percent = Step 5
- plus 2.9 percent = Step 6
- plus 2.9 percent = Step 7
- plus 2.8 percent = Step 8
- plus 2.7 percent = Step 9
- plus 2.6 percent = Step 10

## Federal Pay Range Spread (2)

- Foreign Service Steps
- Uniform percentage amount
- Calculated as 3 percent of previous step

- Step 1
- plus 3 percent = Step 2
- plus 3 percent = Step 3
- plus 3 percent = Step 4
- ...
- plus 3 percent = Step 12
- plus 3 percent = Step 13
- plus 3 percent = Step 14

## The Foreign Service pay system has about a 47 percent range with intergrade differentials of 12 percent for class 9 through 5 and 23 percent for classes 5 through 1.  There is a great deal of overlap between levels.

- Capped at GS-15
- Step 10

- Federal Pay Range Spread (3) Foreign Service Pay Ranges

## Federal Pay Range Spread (5)Special Pay Structures for Special Rate Ranges

- Last resort for staffing problems
- Labor market supply and demand dynamics
- Influenced by non-Federal pay rates
- Links to the GS pay structure

## General Schedule Rates versus Maximum Special Rates

- 67 percent

- 51 percent

## Analysis of Pay Structures: Comparative Measures 

- Measures of Pay Structure
- Midpoint
- Compa Ratio
- Minimum-Maximum
- Measures of Workforce Distribution
- Step Distribution
- Weighted Average

**Notes:**
The midpoint is the middle of the rate range.  While we mathematically have one, we don’t use it for anything and you can’t actually be paid the midpoint (except for GM’s)

compa ratio is used by the private sector to control costs we don’t use that for anything either

## Comparative Measures (1)

**Midpoint differentials** show the difference in midpoints between two grades.

**Compa ratios** compare individual employee pay to the pay range midpoint.

- Example:  An employee’s pay is $14,000.
- The pay range midpoint is $15,000.
- The ratio between the employee’s pay and the midpoint is $14,000/$15,000.
- The employee’s compa ratio is 93%.

- The private sector uses midpoint differentials to construct pay ranges and compa ratios to control costs.

## Comparative Measures (2)

- Grade overlap is the amount by which the pay of one grade overlaps an adjacent grade.
- Grade overlap is minimal when midpoint differentials are large and range widths are small.  Grade overlap is significant when midpoint differentials are small and range spread is large.  *(WorldatWork)*

## Comparative Measures (3)

- Since the General Schedule is adjusted by a single uniform percentage (5 U.S.C. 5303), the current inter-grade differentials are frozen in place.  (See charts for one-and two-grade interval work for GS intergrade differentials.)
- The structural and individual pay mechanisms of the General Schedule do not require Federal managers to calculate compa ratios as part of the pay-setting process.

## How Employees Move Within the GS Pay Structure (1)

- Within-grade increases
- Time in grade
- Satisfactory performance (acceptable level of competence)
- Virtually automatic progression
- Learning curve theory
- Quality step increases
- Outstanding performance
- Not more than once every 52 weeks
- Does not affect time in grade for next within-grade increase

## 30 percent rate range

Uniform dollar within-grade step increases 
3.3 % of step one rate
2.6 % of step nine rate

Grades 1 and 2 out of alignment  

- Uniform dollar within-grade step increases
- 3.3 % of step one rate
- 2.6 % of step nine rate
- Grades 1 and 2 out of alignment

- GRADE 9

- General Schedule Steps

- 29

## Illustration of General Schedule Step Progression

- 30

## Employment Distribution by Step GS-3

- Midpoint

**Notes:**
Employees tend to be in the lower steps at low grades because they leave faster---turnover is higher and they are promoted out faster

## Employment Distribution by Step GS-9

- Midpoint

**Notes:**
More even distribution at middle grade

## Employment Distribution by Step GS-15 (Excludes GM)

- Midpoint

**Notes:**
Tend to be in higher steps at upper grades

## Employment Distribution by Step All Grades

- Midpoint

## Promotions
Career ladder or merit promotion
Minimum two-step increase
	Examples:
GS-9, step 1 promoted to GS-11
$32,380 	 $39,178 (GS-11, step 1)
	amount $ = $6,798	amount % = 20.99%

GS-9, step 5 promoted to GS-11
$36,696	  $39,178 (GS-11, step 1)
	amount $ = $2,482	amount % = 6.76%

GS-9, step 10 promoted to GS-11
$42,091	 $44,402 (GS-11, step 5)
	amount $ = $2,311	amount % = 5.49% 	 

- Career ladder or merit promotion
- Minimum two-step increase
- 	Examples:
- GS-9, step 1 promoted to GS-11
- $32,380 	 $39,178 (GS-11, step 1)
- 	amount $ = $6,798	amount % = 20.99%
- GS-9, step 5 promoted to GS-11
- $36,696	  $39,178 (GS-11, step 1)
- 	amount $ = $2,482	amount % = 6.76%
- GS-9, step 10 promoted to GS-11
- $42,091	 $44,402 (GS-11, step 5)
- 	amount $ = $2,311	amount % = 5.49%

- How Employees Move Within the GS Pay Structure (2)

## Alternative methods for determining individual pay rates and range progression
single rate
skill-based pay/competencies
automatic step rates/longevity
performance-based step rates
step rate and merit based pay
variable merit performance-based pay
structural versus individual adjustments
uniform or variable timing

- single rate
- skill-based pay/competencies
- automatic step rates/longevity
- performance-based step rates
- step rate and merit based pay
- variable merit performance-based pay
- structural versus individual adjustments
- uniform or variable timing

- How Employees Move Within the GS Pay Structure (3)

## A Private Sector Model for Pay Range Progression and Performance

## Comparison of “Shape” of 1949 and 2000 General Schedule

- Note:  GS 2000 pay rates are divided by a factor of 10

## Structural Pay Increases

- The “shape” of the 1949 and 2000 General Schedule are similar.  However, pay for higher grades has increased somewhat faster than at lower grades.
- GS-5 increased 689 percent between 1949 and 2000
- GS-13 increase 734 percent between 1949 and 2000
- Most annual pay adjustments have been a uniform percent across-the-board schedule increase.  Intergrade differentials have remained fairly constant.
- Structural pay costs are controlled by the President and Congress, not individual agencies.
- Timing cycle
- salary survey
- recommendations
- approval/Federal budget process
- implementation

## Current Perspectives (1)

- General Schedule Structural Adjustments
- General adjustment - based on annual change in employment cost index (ECI) as of September 30 minus 0.5 points
- Locality adjustments - based on Bureau of Labor Statistics salary surveys in 32 localities
- Measured, prepared, and analyzed centrally
-  Agencies implement
- President and Congress make final decisions

## ECI and Locality Pay Increases

- 		ECI-Based		    Locality
- _Year__	__	__Adjustment__	__	__Average Rate_
- 1994		     0.00%		      3.95%
- 1995		     2.00%		      5.05%
- 1996		     2.00%		      5.56%
- 1997		     2.30%		      6.38%
- 1998		     2.30%		      6.93%
- 1999		     3.10%		      7.50%
- 2000		     3.80%		      8.62%

- 1994:ECI of 2.2% canceled.  Full locality pay.

- 1995:  ECI of 2.6% reduced.  Locality pay limited.

- 1996:  ECI of 2.4% reduced.  Locality pay limited.

- 1997:  Full ECI.  Locality pay limited.

- 1998:  ECI of 2.8% reduced.  Locality pay limited.

- 1999:  Full ECI.  Locality pay limited.

- 2000:  Full ECI.  Locality pay limited.

## Pay Adjustments
Employees move with the pay structure (Structural Adjustment)
structure adjusted by uniform percentage amount 
annual frequency (aligned to the calendar year, not fiscal year)
Employees move within the pay structure (Individual Adjustment)
within-grade increases
quality-step increases
promotions
Market strategy
FEPCA locality pay phase in
actual - 33.5 percent (2000)
statutory timetable - 90 percent (2001)
2001 locality pay rates reflect the 1999 recommendation of the Federal Salary Council and President’s Pay Agent as adjusted by the President and/or Congress.

- Employees move with the pay structure (Structural Adjustment)
- structure adjusted by uniform percentage amount
- annual frequency (aligned to the calendar year, not fiscal year)
- Employees move within the pay structure (Individual Adjustment)
- within-grade increases
- quality-step increases
- promotions
- Market strategy
- FEPCA locality pay phase in
- actual - 33.5 percent (2000)
- statutory timetable - 90 percent (2001)
- 2001 locality pay rates reflect the 1999 recommendation of the Federal Salary Council and President’s Pay Agent as adjusted by the President and/or Congress.

- Current Perspectives (2)

## March 2000 Locality Pay Gaps versus Implementation in January 2002

- Salary

## Pay Administration Notes

- Step 4 of the base General Schedule is the representative rate used for grade and pay retention and certain reduction-in-force determinations.
- “Red Circle Rates” (above step 10)
- grade retention
- pay retention
- “Blue Circle” Rates (below step 1)
- are not permitted in the General Schedule

## For More Information

- Pay Schedules and Compensation Information
- _www.opm.gov/oca/payrates/index.htm_
- Federal Classification Systems
- _www.opm.gov/fedclass/index.htm_
- The Fact Book
- _www.opm.gov/feddata/factbook/index.htm_
- Pay Structure of the Federal Government
- _www.opm.gov/feddata/_
- Annual Reports of the President’s Pay Agent
- email _payleave@opm.gov_, we will send you a copy.